During the past 12 months, the S&P/ASX 200 Index (ASX: XJO) has dealt out an 8.1% return before dividends. Yet, the Imugene Limited (ASX: IMU) share price — an index constituent — has not seen anywhere near as positive of a performance.
Shares in the clinical-stage immuno-oncology company have painfully fallen 62% this past year. A staggering $760 million in market capitalisation has been stripped away, leaving Imugene at a value of $572 million today.
The discouraging move is hardly due to a lack of announcements. In total, 40 price-sensitive releases have been made by Imugene since this time last year. Still, the continuous flow of developments left the share price seemingly unphased.
So, why is the company’s CEO adamant there will be better times ahead for shareholders?
Industry in a slump
On 6 July, Imugene CEO Leslie Chong issued a letter to shareholders. Chong noted no improvement in the broader biotechnology sector globally and within Australia in the letter.
A claim backed up by the weakness demonstrated across even the biggest biotech companies in the world. Take, for example, Pfizer Inc (NYSE: PFE) and AbbVie Inc (NYSE: ABBV) — two stalwarts of the industry — each carrying share price declines of more than 11% over the last year.
What is remarkable is that both of the abovementioned biotechs generate tens of billions of dollars each year in revenue. In addition, these are highly profitable businesses — not little drug developers still looking to land a moneymaker.
There are a few factors that could be at play here. However, the most impactful element for the Imugene share price is arguably the company’s pre-product stage. According to the company’s most recent presentation, all its programs are in phase II trials or earlier.
This creates an additional layer of risk for investors in an environment where ‘risk-free’ returns from bonds are much more attractive. As a result, capital is less inclined to flow toward the likes of Imugene until it provides improved signs of a return on investment (ROI).
However, the CEO highlighted her team’s belief that “the market will see the value of our company and the opportunity in the share price.”
What could drive the Imugene share price higher?
Being a clinical-stage biotech, the company’s share price movement can depend highly on trial findings. Hence, any indication of positive outcomes from Imugene’s various programs could bolster the share price.
In June, Imugene announced that the HER-Vaxx therapy had induced antibodies. The antibody response correlated with tumour reduction. The Imugene share price lifted 2.25% on the release day.
Furthermore, shareholders will undoubtedly want to see the company’s other programs progressing from phase I to II. Fortunately, Imugene remains well funded with more than $150 million in cash at its disposal.
