IPO Report: Immune Design (IMDZ)

Immune Design ($IMDZ) is a clinical stage immuno-therapy company with next-generation in vivo approaches designed to enable the body’s immune system to fight disease. It is headquartered in Seattle, WA.

Ten other companies are scheduled for the week of July 21, 2014. The full IPO calendar is available at IPOpremium.

The manager and co-managers are Jefferies & Co. and Leerink Partners. The joint manager is Wells Fargo Securities.

IMDZ scheduled a $60 million IPO with a market capitalization of $202 million at a price range midpoint of $13 for Thursday, July 24, 2014 on the Nasdaq. SEC filings

Immune Design IPO Report

Overview

IMDZ is a clinical stage immuno-therapy company with next-generation in vivo approaches designed to enable the body’s immune system to fight disease.

IMDZ has engineered its technologies to activate the immune system’s natural ability to create tumor-specific cytotoxic T cells to fight cancer.

One product whose trial started in January 2014 had an initial complete initial response from one patient. That trial is expected to be completed the first quarter of 2015.

Existing stockholders indicated an interest in purchasing up to $24.2 million of the IPO, 40%.

Valuation

Glossary

Conclusion

One product whose trial started in January 2014 had an initial complete initial response from one patient.  That trial is expected to be completed the first quarter of 2015.

Therefore, at 2.6 times book value IMDZ seems like an interesting speculation.

The rating is neutral plus.

Business

IMDZ is a clinical stage immuno-therapy company with next-generation in vivo approaches designed to enable the body’s immune system to fight disease.

IMDZ has engineered its technologies to activate the immune system’s natural ability to create tumor-specific cytotoxic T cells to fight cancer.

Multiple product candidates

IMDZ is developing multiple product candidates from its two discovery platforms, DCVexTM and GLAASTM, which IMDZ believes have the potential to treat a broad patient population.

IMDZ’s product candidates, LV305, CMB305 and G100, utilize multiple immuno-oncology approaches and, IMDZ believes, address the shortcomings of existing therapies.

The following is IMDZ’s product development pipeline based on its DCVex and GLAAS platforms:

LV305 was developed from the DCVex platform and IMDZ is currently enrolling patients in a Phase 1 clinical trial for the treatment of five solid tumor types. IMDZ commenced the trial in April 2014, with its first patient treated in June 2014, and expect it to be completed by the end of 2014 with safety and immunogenicity data expected to be available in the first quarter of 2015.

CMB305 is a prime-boost approach that combines LV305 with a second agent, G305. G305 is based on IMDZ’s GLAAS platform and is in a Phase 1 clinical trial. IMDZ expects to commence a Phase 1 clinical trial for CMB305 in a subset of the tumor types studied in the LV305 and G305 trials by the end of 2014 with data expected to be available by mid-2015.

Initial complete initial response, one patient

G100 was developed from the GLAAS platform and IMDZ is currently enrolling patients with Merkel cell carcinoma in a Phase 1 clinical trial. IMDZ commenced the trial in January 2014 and expect it to be completed in the first quarter of 2015.

Notably, one of IMDZ’s first patients treated had an initial complete response in the single loco-regional tumor treated with G100.

While IMDZ believe this initial complete response may be related to treatment with G100, the results from its Phase 1 clinical trial are not yet final, and IMDZ cannot be certain that this is the case or that this, or any future response observed, will be durable.

Because of its prime-boost approach, IMDZ believes CMB305 should be more effective than either of LV305 or G305 alone.

Although IMDZ currently intends to focus its development efforts on CMB305 and G100, IMDZ plans to conduct a small exploratory trial to compare LV305 and CMB305 in the same tumor types. After reviewing those data, IMDZ may elect to separately develop LV305.

Unique approach

IMDZ believes its approach to fighting cancer is the first of its kind. IMDZ utilizes DCVex and GLAAS to develop product candidates that work in vivo and are designed to create and expand diverse armies of immune cells, known as cytotoxic T lymphocytes or CTLs, to fight tumors.

An in vivo approach is preferred because it addresses both the cumbersome administration and the need for patient customization inherent in ex vivo approaches.

The fundamental discoveries underlying DCVex originated with one of IMDZ’s founders, Nobel laureate David Baltimore, Ph.D. Dr. Baltimore and his colleagues theorized that a lentivirus, which is a virus that works in immune cells such as dendritic cells, or DCs, could be engineered to selectively deliver the specific genetic information of a tumor marker, called an antigen, directly to DCs in the skin.

The expression of this antigen triggers an immune response of CTLs to eliminate the tumor. GLAAS, in comparison, is a highly potent synthetic stimulator of a specific cellular receptor called TLR4 that is present in DCs.

Activation of DCs through TLR4 can safely trigger an anti-tumor immune response and synergize with CTLs generated by DCVex for what IMDZ believes will be a greater degree of tumor killing than either approach alone.

Revenue

Collaboration and Licensing Revenue

IMDZ derives revenue from collaboration and licensing agreements and the sale of products associated with material transfer, collaboration and GLA supply agreements.

IMDZ recognized $9.4 million in revenue from inception through March 31, 2014.

In October 2010, IMDZ entered into three separate license agreements with MedImmune pursuant to which IMDZ granted MedImmune a worldwide, sublicensable, exclusive license to use GLA to develop and sell vaccines in three different infectious disease indications.

MedImmune paid upfront payments under the license agreements in 2010.

While IMDZ has not recorded any revenue since 2010, under each license agreement, MedImmune is obligated to make additional payments based on the achievement of certain developmental, regulatory and commercial milestones for the licensed indication.

GLA Product Sales

IMDZ sells formulations of GLA to selected companies for use in ongoing preclinical studies and clinical trials. All revenues associated with the sale of GLA supplied by us are reported as GLA product sales with the applicable costs reported under cost of product sales.

In 2012 and 2013, IMDX recognized approximately $1.9 million and $0.9 million in revenues, respectively, and $1.5 million and $0.7 million in cost of GLA product sales, respectively, through these arrangements.

Dividend Policy

No dividends are planned.

Intellectual Property

IMDZ is the owner or exclusive licensee to proprietary patent positions related to its DCVex platform.

IMDZ’s patent portfolio includes a patent family licensed from the California Institute of Technology, or Caltech, and is directed to its dendritic cell targeting lentiviral vector platform technology.

This patent family includes patents granted domestically and in Europe, Australia and South Africa and has granted claims that include composition of matter claims to IMDZ’s lentiviral vector and packaging cells as well as methods of using IMDZ’s lentiviral vector to elicit an immune response against a target antigen of interest and methods of preparing IMDZ’s lentiviral vector.

IMDZ licenses rights to three granted U.S. patents and five granted foreign patents from the Infectious Disease Research Institute, or IDRI, and own or license numerous patent applications in the United States and abroad directed to IMDZ’s GLAAS platform.

The patents licensed from IDRI include patents in the United States, Europe, Australia, China, Japan and Hong Kong. Key patents and pending applications in IMDZ’s portfolio are directed to vaccine compositions and uses of compositions containing GLA in a variety of disease indications including cancer, infectious diseases and allergy.

The three issued IDRI patents in the United States and five granted IDRI foreign patents are directed to any antigen-containing vaccine formulations containing GLA, medical uses of the formulations to generate antigen-specific immune response for cancer, infectious disease and autoimmune disease antigens and medical uses for generating an immune response by administering pharmaceutical compositions containing GLA. IMDZ also owns pending U.S. and PCT patent applications directed to G103.

Competition

IMDZ faces competition from established and emerging pharmaceutical and biotechnology companies, academic institutions, governmental agencies and public and private research institutions, among others.

Any product candidates that IMDZ successfully develops and commercializes will compete with existing therapies and new therapies that may become available in the future. Key product features that would affect IMDZ’s ability to effectively compete with other therapeutics include the efficacy, safety and convenience of its product candidates.

The availability of reimbursement from government and other third-party payors will also significantly affect the pricing and competitiveness of its product candidates. IMDZ’s competitors may also obtain FDA or other regulatory approval for their product candidates more rapidly than IMDZ may obtain approval for IMDZ's, which could result in its competitors establishing a strong market position before IMDZ is able to enter the market.

5% stockholders

Ed Penhoet       21.0%

Brian Atwood    21.0%

Peter Svennilson           26.2%

Alta Partners VIII, L.P.    20.9%

Aventis Holdings Inc.       8.8%

ProQuest Investments IV, L.P.   24.1%

The Column Group, LP              26.1%

Topspin Fund L.P.                     7.6%

Entities affiliated with Versant Ventures             20.9%   

Use of proceeds

IMDZ intends to use the $54 million in proceeds from its IPO as follows:

$28.5 million to fully fund Phase 2 clinical trials of CMB305, including completion of a randomized trial in a high-incidence tumor and an exploratory trial comparing LV305 and CMB305 in the same tumor types;

$2.3 million to fully fund an additional Phase 1 clinical trial of G100 in a second indication; and

the remainder would fund working capital and general corporate purposes, including potential future development programs, early-stage research and development, continued development of its DCVex and GLAAS platform technologies, and research and development personnel and overhead expenses.