Is Immunomedics Stock A Buy?

Immunomedics, Inc. (NASDAQ:IMMU) saw a value spike in September 2020 that doubled its stock price. In total, the company’s trading price of $80-90 is nearly 10x its April lows of $9 amid the coronavirus pandemic.

This came on the heels of two announcements – one in which Gilead Sciences (NASDAQ:GILD) agreed to purchase the company for a 108-percent premium in the middle of September, and a week later that it has positive results from its accelerated clinical trials for a breast cancer treatment.

That’s great news for Gilead and anyone who invested in the Spring, but it already happened. The market reflects all this news by the time you read this and react. The price is already near what Gilead paid for it – so, is Immunomedics stock a Buy still?

Let’s dive into the company and its offerings, the deal with Gilead, and determine where the biggest payout is likely to occur. We’ll start with a breakdown of the company itself.

Immunomedics Target Market: 600k Cancer Victims

Immunomedics research is targeted on treating cancer and autoimmune diseases. There nearly 600,000 cancer-related deaths each year, according to the CDC, and that number is steadily rising.

It only ranks just barely below heart disease to take second place as the leading cause of death in the United States. Other causes, such as accidents, diabetes, influenza, and stroke lag far behind. That makes cancer one of the most important ailments to treat.

Women most often experience it in the form of breast cancer, which is estimated to affect one out of every eight women at some point in their lives.

Immunomedics’ proposed treatment is called Trodelvy (Sacituzumab govitecanhziy), which was approved by the U.S. Food and Drug Administration after positive results from its accelerated Phase 3 clinical trials for progression-free survival (PFS) in patients diagnosed with metastatic triple-negative breast cancer (mTNBC).

When compared to chemotherapy treatment, the median PFS rate more than triples from 1.7 months to 5.6 months. These results are encouraging and gave Gilead an immediate boost in its investment.

The company bought in at $88 per share, which represented a premium of it last closing price of $42.25 the Friday before the deal was announced. Here’s why they did it.

Is Immunomedics Stock A Buy?

The purchase announced Monday, September 13, 2020, valued the company at approximately $21 billion.

Gilead (GILD) will acquire at least a majority of any outstanding shares and is funded by $15 billion in cash and $6 billion in newly issued debt, according to the press release.

Of course, this means shareholders can refuse the sale, although exact terms for how IMMU will roll into GILD have yet to be laid out. Meanwhile the actual stock value is already trading in the $85 range, leaving very little upside at this point for potential investors.

Essentially, the stock price doubled and is already reflecting the Gilead buyout price. Gilead, on the other hand, is the stock to watch.

Trodelvy is only one potential cancer treatment it has in its pipeline, and its oncology products already brought in $334 million in revenue for the first half of 2020.

Gilead (GILD) is also an early frontrunner for a coronavirus vaccine Veklury (Remdesivir), giving it a lot of room to potentially grow.

The real question is whether you should buy Gilead Sciences., and with the stock price continuing to slide through the third quarter, the answer may be yes.

Risks of Buying Immunomedics Stock

Although it was already announced and is likely to go through with no problems, Gilead’s acquisition of Immunomedics isn’t scheduled to be completed until the end of 2020. This means something can still happen to curtail the sale, but it’s very unlikely to happen.

As the first approved treatment for mTNBC, Trodelvy stands to add over $2 billion to its revenues just off this one drug.

Gilead experienced great growth upon its funding from Operation Warp Speed on a COVID-19 cure, but it also had to pay $97 million to resolve kickback claims in connection to its pulmonary arterial hypertension drug Letairis.

However, the stock reached a high of $85 way back in May and has since slid back down into the $60s heading into the fourth quarter. This puts it at a discount, but it’s unclear how much lower it’ll go.

The company isn’t likely to start profiting from its acquisition until 2023, and investors are going to feel a pinch if its COVID-19 clinical trials miss their end-of-year deadline. While Gilead has a great potential upside, the road isn’t clear of obstacles that could derail it.

Can Immunomedics Competitors Win?

Even though it has the protection of a larger company now, Trodelvy isn’t fully without competition. Like the coronavirus vaccine, there are several companies invested in cancer research that with potential, including ESSA Pharma, Merck & Co (MRK), Synlogic, Pfizer (PFE), and Xynomic Pharmaceuticals (XYNO).

Each can potentially create a competing product using their own IP that could dig into the product’s potential profitability.

Still, with cancer being such a looming topic on the minds of so many people worldwide, there’s likely to be room for multiple treatment options.

Also, it’s now just one drug in a larger pipeline, so the effects of its sales are less impactful than if Immunomedics hadn’t sold to Gilead.

Is Immunomedics Stock a Buy? The Bottom Line

Immunomedics is the first potential treatment for a deadly form of breast cancer that affects women around the world. This treatment is a medical breakthrough that should generate plenty of revenue for the company moving forward.

The company in question at this point, however, is Gilead Sciences, who purchased the company for nearly $21 billion in cash effective September 13, 2020.

You can still invest in Gilead however, as its stock lost much of its coronavirus muster and could represent a nice discount for those willing to wait three to five years to see a return.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.