Leg: This morning, Immunicon reported a 2Q04 loss per share of $0.39. Our estimate
was a loss of per share of $0.23 and the consensus estimate was a loss per
share of $0.22.
* The difference between our estimate and the loss per share announced by
Immunicon was due to higher-than-expected R&D and SG&A.
* Immunicon ended 2Q04 with $67.6 million in cash and cash equivalents and
approximately $6.9 million in long-term obligations. Immunicon stated that it
expects total cash burn to be approximately $30 million for FY2004.
* The 3Q04 launch remains on track. We expect initial sales to be modest, as it
will take some time to familiarize oncologists and technicians with these
technologies. Immunicon also announced that representatives from both Veridex
and J&J will begin detailing in 3Q04.
* Immunicon also announced that its CTC study of breast cancer patients with
metastatic disease to the bone is complete and the patient follow-up phase is
ongoing.
* We reiterate our Buy rating on the shares. Our 12-month target price of $14
is based on our discounted earnings model.
Investment Conclusion
Immunicon is developing cell-based research and diagnostic products that could
potentially revolutionize the cancer treatment paradigm. Immunicon's CellSearch
Epithelial Cell Kit, which has received 510(k) clearance for use in the
management of metastatic breast cancer, has demonstrated the ability to predict
whether a therapy is offering a therapeutic benefit to a patient early in
treatment. This offers physicians the ability to switch patients from sub-
optimal treatments sooner in therapy, and could potentially improve overall
survival.
In our opinion, Immunicon's technologies will eventually be used in the
treatment and evaluation of the majority of metastatic cancer patients.
However, sales could be modest until physicians gain familiarity and confidence
in using the tests in their treatment strategies. Immunicon's partnership with
Veridex (a subsidiary of Johnson & Johnson) provides validation of the
company's technology given the deal structure, and significantly reduces risk,
in our opinion. Veridex is a committed partner with marketing and
commercialization expertise. We believe IMMC shares are undervalued. We use a
35x multiple of 2008E EPS of $1.02, discounted at 30% to arrive at our 12-month
target price of $14. Please see our model (attached) as we have adjusted
several of our estimates.
Company Description
Immunicon Corporation is engaged in the development and commercialization of
highly specialized human diagnostic products, pharmaceutical development tools,
and life science research tools using a wide range of proprietary platform
technologies. The company's initial focus is the development of cell-based and
molecular diagnostic products and systems for clinical use in the field of
cancer. Immunicon's technology is approved for the management of metastatic
breast cancer. Veridex, LLC, a Johnson & Johnson company, will market
exclusively any diagnostic and screening products developed in the cancer
field. Immunicon plans to develop additional strategic alliances for
commercialization of products outside of cancer markets.
I, Edward Nash, certify that the views expressed in this research report.. |
