Innate Pharma's Premium Valuation Is Justified
Edison | Mar 23, 2014 03:12AM ET
Innate Pharma (IPH.PAR) has regained IPH22 from its partner Novo Nordisk B (NOVOb.COP) to expand its clinical pipeline of immunotherapy assets. IPH22, which was being developed for rheumatoid arthritis, has potential in many solid and haematological tumours. The company will provide details of its development plans at its R&D event on 10 April. The acquisition of IPH22 confirms Innate Pharma's position as a leading biotech company in oncology immunotherapy, justifying its premium rating.
Innate Pharma has paid Novo Nordisk €2m in cash and 600,000 shares to reacquire the full rights to IPH22 to develop the antibody in oncology indications instead of rheumatoid arthritis. The latter may also receive registration milestones of €20m and tiered single-digit royalties. A Phase I study in patients with rheumatoid arthritis is currently being completed, but Innate Pharma has already reported that the antibody has a good safety profile.
h3 Another clinical oncology immunotherapy product/h3IPH22, which binds to the NKG2A receptor, is a checkpoint inhibitor. The antibody binds to cytotoxic T-cells (CTL) and natural killer (NK) cells, enhancing the ability of these immune cells to detect and destroy tumour cells. The mechanism of action is similar to those of BMS's ipilimumab and nivolumab and Merck &Co's lambrolizumab, although the activity of these antibodies is only mediated by CTL.
h3 Development programme to be laid out on 10 April/h3Innate Pharma will provide an update on its development plans for IPH22 at its R&D event on 10 April. The antibody has potential in many haematological and solid tumours, both as monotherapy and in combination with other therapies.
h3 Valuation: Premium valuation justified/h3Innate Pharma trades at a 16% premium to our base case DCF valuation of €374m, but we expect this rating to be maintained. The field of oncology immunotherapy promises to change fundamentally the way cancer is treated, and interest in the approach is set to grow as more immunotherapies approach the market. Also, the strength of Innate Pharma’s pipeline and IP portfolio could make it an acquisition target. We will review our valuation once the development programme for IPH22 has been disclosed at its R&D event in April.
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