IMNP : Immune Pharmaceuticals Stock Analysis and Research Report

2017-10-23 - by Asif, Contributing Analyst

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Immune Pharmaceuticals Inc., together with its subsidiaries (collectively, “Immune” or the “Company”) is a clinical stage biopharmaceutical company specializing in the development of novel targeted therapeutic agents in the fields of immuno-inflammation, dermatology and immuno-oncology. The Company’s lead product candidate is bertilimumab, a clinical-stage, first-in-class, fully human antibody, which targets eotaxin-1, a key regulator of immuno-inflammation. The Company is developing bertilimumab for bullous pemphigoid (“BP”) an orphan auto-immune skin blistering disease, and ulcerative colitis (“UC”) a disease that causes inflammation and ulcers in the lining of the large intestine. Immune filed an orphan drug application with the Office of Orphan Products Development of the FDA to obtain Orphan Drug Designation for bertilimumab in BP on February 24, 2017.

The Company’s asset portfolio includes NanoCyclo, a topical nanocapsule formulation of cyclosporine-A, for the treatment of atopic dermatitis and psoriasis, AmiKet, a prescription topical analgesic cream that has completed Phase II clinical trials, and LidoPain. The Company’s immuno-oncology pipeline includes Ceplene, which is effective for the maintenance of remission in patients with Acute Myeloid Leukemia (“AML”) in combination with interleukin-2 and Azixa and crolibulin, two clinical-stage, vascular disrupting agents (“VDA”), which have demonstrated encouraging preliminary proof of concept study results. In addition, the Company has two immuno-oncology platform assets, consisting of a bispecific antibody platform and a nanotechnology combination platform, referred to as “NanomAbs”.

The Company’s current product portfolio is summarized below:

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Ceplene®, crolibulinTM, Azixa®, AmiKetTM and LidoPain® are trademarks that Immune own.

Business Strategy

The Company’s core business strategy is to build a portfolio of novel immunotherapies and compounds with the potential to treat or prevent severe inflammatory diseases in dermatology, gastroenterology and cancer, develop each compound to pre-determined milestones, and license the compounds to pharmaceutical companies for advanced development and commercialization. The Company intends to obtain revenues from licensing fees, milestone payments, development fees, royalties and/or sales related to the use of its drug candidates or intellectual property for specific therapeutic indications or applications.

In April 2017, the Company announced a corporate restructuring with the objective of prioritizing and segregating its research and development efforts on a focused set of products in inflammatory disease and dermatology and strengthening its financial position. Under this strategy, the Company intends to focus its business on immuno-inflammation in general, and immuno-dermatology in particular, by developing its core asset, bertilimumab, and by developing topical nano-cyclosporine for the treatment of atopic dermatitis and moderate psoriasis. The Company will continue to consider the optimal path forward for its pain programs, AmiKet and LidoPain.

The Company intends to segregate its oncology business into its subsidiary, Cytovia, Inc. (“Cytovia”) and pursue a possible spin-off of Cytovia into a separate, stand-alone company. Cytovia will focus on the development and commercialization of novel immuno-oncology and hematology therapeutics, led by Ceplene, Azixa, crolibulin and the Company’s bispecific antibody platform. Additionally, Cytovia may seek to acquire commercial stage drugs in the field of immuno-oncology. The spin-off is expected to create two independent publicly-traded companies with distinct strategic plans, leadership, growth strategies, and operational and development priorities.

Recent Developments

Acquisition of Ceplene Rights

On June 15, 2017, the Company entered into an Asset Purchase Agreement with Meda Pharma Sarl, a Mylan NV company to repurchase assets relating to Ceplene, including the right to commercialize Ceplene in Europe and to register and commercialize Ceplene in certain other countries (the “Asset Purchase Agreement”). Immune sold certain of these Ceplene-related assets to Meda in 2012. Cytovia intends to build upon Meda’s Ceplene commercialization efforts in Europe, Asia and Latin America and to pursue continued development of Ceplene towards potential regulatory approval in the United States.

In addition, on June 15, 2017, substantially contemporaneous with the entry into the Asset Purchase Agreement, the Company entered into a Standby Financing Agreement (the “Standby Financing Agreement”) with Daniel Kazado (the “Standby Financer”) a member of the Company’s Board of Directors and a beneficial owner of the Company’s capital stock. Currently, the Company intends to finance the $5.0 million financial obligations contemplated by the Asset Purchase Agreement through Cytovia on a basis that is on terms that are acceptable to the Company’s board of directors and without recourse to the Company. The Standby Financer will support the financial obligations of the Company to pay the fixed consideration installments, in the aggregate amount of $5,000,000, due under and in accordance with the terms of the Asset Purchase Agreement. In the event that Cytovia has not obtained funding on terms reasonably acceptable to the Company (including, without limitation, that such funding be on a basis that is without recourse to the Company), then, pursuant to the terms of the Standby Financing Agreement, at or prior to each installment date, the Standby Financer shall lend the Company or Cytovia (as determined in the discretion of the Company’s Board of Directors) an amount in immediately available funds equal to the fixed consideration installment payment then due and payable under the Asset Purchase Agreement (the “Standby Commitment”). The loan made by the Standby Financer in respect of such fixed payment shall be evidenced by a promissory note in an aggregate principal amount equal to the amount of funds lent by the Standby Financer. The Standby Commitment shall expire on the earliest of (a) satisfaction in full by the Standby Financer of his obligations under the Standby Financing Agreement, (b) Cytovia having obtained funding on terms reasonably acceptable to the Company and (c) the Company having been fully discharged of and released from all liability of all of its obligations under the Asset Purchase Agreement.

Debt Assignment and Exchange

On July 7, 2017 (the “Closing Date”) the Company, Hercules and an investor (the “Investor”) entered into an Assignment Agreement (the “Assignment Agreement”) whereby Hercules assigned to the Investor the existing amount outstanding under the Loan and Security Agreement between the Borrower and Hercules dated as of July 29, 2015 (the “Loan Agreement”), as further evidenced by a Secured Term Promissory Note that was issued by Borrower to Hercules on July 29, 2015 (the “2015 Note”): the 2015 Note and the Loan Agreement together, (the “Securities”).

Also on the Closing Date, the Company and the Investor entered into an Exchange Agreement (the “Exchange Agreement”) whereby the Company issued to the Investor a senior secured convertible promissory note with a principal amount of $2,974,159 (the “Exchange Note”) in exchange for the Securities.

The Exchange Note is convertible, at the option of the holder, into shares of the Company’s common stock, par value $0.001 per share, at a per share price of $2.95 (the “Fixed Conversion Price”), subject to adjustment as provided in the Exchange Note, but in no event to a conversion price lower than $1.00 per share and subject to a total beneficial ownership limitation of 4.99% of the Company’s issued and outstanding common stock. The Exchange Note has a maturity date (the “Maturity Date”) that is one year from the Closing Date. The Maturity Date may be accelerated, at the option of the holder, upon the occurrence of an Event of Default (as defined in the Exchange Note).

The Exchange Note is repayable by the Company through equal monthly amortization payments during the term of the Exchange Note, in cash or in shares of common stock at the Amortization Conversion Price (as defined in the Exchange Note) at the option of the Company. The holder has the option to accelerate each amortization payment in up to three separate payments and demand such payments in shares of the Company’s common stock. All payments in shares of common stock are subject to the Company complying with the Equity Conditions (as defined in the Exchange Note). The Company may prepay the Exchange Note at any time (upon 10 days’ notice) in cash at 115% of principal amount and accrued interest.

Additionally, so long as the Exchange Note remains outstanding or the holder holds any Conversion Shares (as defined in the Exchange Note), the Company shall not enter into any financing transaction pursuant to which the Company sells its securities at a price lower than $1.00 per share without the written consent of the holder.

In July 2017, EMA assigned the April 2017 Convertible Notes to MEF I, LP.

Pint Licensing Agreement

On July 10, 2017, Cytovia entered into an exclusive licensing agreement (the “Licensing Agreement”) with Pint Pharma International S.A. ("Pint"), a specialty pharmaceutical company focused on Latin America and other markets, for the marketing, commercialization and distribution of Ceplene throughout Latin America (the “Territory”, as more fully defined in the Licensing Agreement) through Pint and one or more of its affiliates. Pursuant to the Licensing Agreement, Pint will also pay Cytovia (i) 35% of net sales in the territory (ii) a milestone payment of $0.5 million when net sales of Ceplene in the Territory first reach $10.0 million in any calendar year and (iii) a milestone payment of $1.25 million when net sales of Ceplene in the Territory first reach $25.0 million in any calendar year. Cytovia further granted Pint and its affiliates certain sublicensing rights to Ceplene, and a right of first refusal on any new products of Cytovia within the Territory during the term of the Licensing Agreement.

With regard to any regulatory approvals and filings related to the commercialization of Ceplene within the Territory, Pint shall be the applicant, holder of such regulatory approvals and will be responsible for the content of such regulatory submissions, as well as all costs and expenses related to, among other items delineated in the Licensing Agreement, the fees, filings, compliance, registration and maintenance of such required regulatory approval matters. Cytovia shall be responsible for providing (or if in the control of a third party, to ensure such third party provides) all appropriate documentation, samples and other information in support of Pint in connection with its regulatory submissions, compliance and maintenance matters in the Territory concerning the Ceplene products.

Additionally, in connection with the Licensing Agreement, the parties thereto agreed that Pint Gmbh, an affiliate of Pint, will separately enter into an investment agreement, pursuant to which Pint Gmbh will make to an investment of $4.0 million in a series A valuation into Cytovia in exchange for an equity interest in Cytovia. Dr. Massimo Radaelli, Executive Chairman of Pint, will also join the board of Cytovia upon completion of the investment and an effective spin off of Cytovia from the Company, if and as consummated.

Appointment of Chief Medical Officer and Chief Operating Officer

On August 14, 2017, Tony Fiorino, MD, PhD joined the Company to the joint position of Chief Medical Officer and Chief Operating Officer. Dr. Fiorino will be responsible for all research and development and clinical and manufacturing activities for the Company’s core pipeline assets, bertilimumab and nano-cyclosporin.

Important Note: This research report is incomplete.
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