Might Cephalon be ready to pounce on ImmuPharma? Print E-mail
By Panmure Gordon - ProactiveInvestors.com   
Friday, 25 March 2011 09:04

Here’s a conundrum for US specialty pharma group Cephalon, Inc. (NASDAQ:CEPH), a partner of ImmuPharma (LON:IMM).

Does it bid for the British drugs discovery group now, before the results of a pivotal phase study, or wait and risk triggering milestone payments and royalties that could eventually cost it $1 billion.

ImmuPharma is valued at just over £60 million and priced towards the lower end of its historic trading range.

So the take-out option would look quite attractive – a point endorsed by Savvas Neophytou of Panmure Gordon this morning, when restating his buy advice and 300 pence a share price target on the stock.

The shares are currently trading at 74 pence a piece.

ImmuPharma is developing Lupuzor to treat the auto-immune disease Lupus.  Its next update is the release of phase IIb clinical trial results in the summer of this year.

This is an important milestone as it will generate US clinical data on the drug, which in earlier studies appeared to be more efficacious and easier to administer than the latest breakthrough treatment Benlysta.

GlaxoSmithKline-developed Benlysta is the first new product in almost half a century for the treatment of Lupus.

Peak sales are predicted to be around US$3.6 billion, which puts into perspective the scale of the opportunity open to Lupuzor if its researchers can convince the US Food & Drugs Administration of its efficacy and safety.

Neophytou reckons there is a chance that Cephalon may actually pre-empt the publication of the phase IIb data – and he has a very good precedent for this.

Cephelon recently announced it would pay up to US$300 million for Gemin X Pharmaceuticalst to augment its late stage drug pipeline.

What in effect it is buying is the rights to a lung cancer drug at the identical phase development as Lupuzor – ie “pre-phase IIb”.

The American biotechnology giant (market cap US$4.5 billion), is in a bit of a pickle. It is cash rich, but the patent is running out on its best seller, a sleeping pill called Provigil.

So if it is buying Gemin X on that basis, what is to stop it launching an all-out bid for ImmuPharma?

That’s exactly the reasoning of Panmure’s Neophytou, who says: “Immupharma is trading at the bottom end of its current trading range.

“This represents an excellent entry level in our view, particularly in light of recent market developments, which demonstrate partner Cephalon’s strategy of buying into new product development to replenish its product portfolio.

“If we make the brave assumption that Lupuzor works, then we believe Cephalon may consider acquiring ImmuPharma in the next six months, because Lupuzor associated future liabilities for Cephalon already outweigh ImmuPharma’s current market capitalisation.

“In our view, when Cephalon is certain it has a ‘proper’ drug on its hands, it may launch a bid for ImmuPharma’s outstanding share capital.

“We had previously assumed such an event could take place in the second half of this year, but the recent acquisition of Gemin X Pharmaceuticals BEFORE the end of phase IIb trials has made us reappraise this assumption.

“If Lupuzor’s interim phase IIb data is due around mid-2011, could it be that Cephalon launches a bid in Q2?” We wonder.

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