Idera Pharmaceuticals Inc (IDRA)

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http://seekingalpha.com/article/2773545-idera-pharmaceuticals-going-into-2015


Idera Pharmaceuticals Going Into 2015

Dec. 22, 2014 2:57 PM ET | About: Idera Pharmaceuticals, Inc. (IDRA)



Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)






Summary
•Idera has an exciting year ahead based on number of important developments.
•Positive clinical data on IMO-8400 and IMO-2055, will result in clinical advancement.
•Development in the GSO program will garner increased investor attention, as it holds promise and potential.
•These activities will increase the need for additional funds, which may result in dilutive stock offering, if a partnership is not achieved.
•I remain bullish on Idera, and expect the stock to add significant shareholder value in 2015.



Idera Pharmaceuticals Inc. (NASDAQ:IDRA) is set to enter 2015 with a number of important developments happening during the year. The company was recently added to Piper Jaffray's top small-cap pick for 2015, which boosted the share prices by 4.5% approximately. The price target set is $7, where currently the stock trades at $4.12, as of December 19, 2014. I previously wrote a bullish piece on Idera highlighting its potential and risks. This piece, however, focuses on the recent developments and the potential in 2015.

Clinical Trial Data

Idera recently presented the clinical safety results for IMO-8400 phase I and phase II trials at the Annual Meeting of American Society of Hematology (ASH). The Diffuse Large B-Cell Lymphoma (DLBCL) phase I results demonstrated that IMO-8400 was well-tolerated in dose escalating study of up to 0.6 mg/kg for 12 weeks. The drug was administered weekly via subcutaneous injection and the only adverse events during the treatment were injection site reactions. These reactions included erythema, induration and pruritus for multiple doses. In the trial there were no serious adverse events related to the treatment, no drug related discontinuations and no pattern of systemic adverse events. The three severe events reported were not treatment related and the subjects discontinued treatment following the events.

The results for the combination therapy of IMO-8400 with Rituximab showed positive results for patients with B-cell Lymphomas harboring MYD88 L265P mutation. In the preclinical model, the combination of IMO-8400 and rituximab showed significant reduction in tumor volume and also decreased production of IL-10, a cytokine responsible for the proliferation and survival of B-cells. Both agents in monotherapy were unable to demonstrate the results seen in combination therapy. This presents as an opportunity to run combination therapy for B-cell lymphoma patients with MYD88 L265P who fail to respond to R-CHOP.

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Source: Idera's ASH Presentation

IMO-2055 is a cancer immunotherapy candidate of Idera, which previously failed to meet its primary endpoint of Progression Free Survival (PFS) in a phase II trial for recurrent and metastatic squamous cell carcinoma of head and neck (SCCHN), in combination with cetuximab. However, IMO-2055 did demonstrate safety and tolerability. The company recently announced preclinical data for intratumoral injection of IMO-2055, a toll-like receptor (TLR) agonist, in combination with ipilimumab, a checkpoint inhibitor targeting CTLA-4. The results showed that the combination regimen showed significant and systemic anti-tumor activity, with effects on distant tumors as well, when compared to monotherapy with either agents.

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Source: Idera's AACR Poster

Management Shuffle

Idera has recently witnessed a management shuffle, with several key additions to the management team. The major appointment is that of Vincent J. Milano as the Chief Executive Officer of Idera Pharmaceuticals. Mr. Milano has succeeded Sudhir Agrawal, who now serves as the President of Research and also serve on the company's Board of Director's. The appointment has brought with it many hopes for the investors, as Mr. Milano has a proven track record of success with ViroPharma Inc., which was acquired by Shire Pharmaceuticals in January 2014 for a whopping $4.2 billion. It's expected that Mr. Milano will add significant value to Idera, and repeat history with a similar sale of Idera in the future. Moreover, Dr. Agrawal as the President of Research, will focus his greater attention on research and development of the pipeline candidates.

Another addition to the management team is that of Robert A. Doody Jr. as the Vice President for Investor Relations and Corporate Communications. He previously served as the Head of Investor Relations of ViroPharma for eight years, during which the company was acquired by Shire Pharmaceuticals. Other appointments are that of J. Peter Wolf as Senior Vice President General Counsel and Elizabeth Eberhardt as Vice President Oncology. Both of them previously served at ViroPharma as well.

Thus, these additions add significant value to Idera Pharmaceuticals as the team previously have been working at ViroPharma and may prove to be of instrumental value for Idera in the coming years.

Market Performance

The shares of Idera have seen a healthy appreciation since the last I wrote about it. This uptrend is expected to continue into next year, with recent positive news, and a handful of catalysts expected in 2015.

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Source: Barchart

The charts for Idera show an upward trend in both the SMA50 and SMA500, whereas the price is currently trading above both these measures. This upward trend is supported by increase in volume traded; and also an upward trend in momentum. The upward trend is expected to continue in the upcoming days into next year. However, comparing the SMA50 and SMA200, a golden cross in the next few sessions may even be expected, further strengthening the bullish trend, as can be seen in the chart below.

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Source: Barchart

Upcoming Catalysts

Idera is expected to announce additional data from the 24 week study of IMO-8400 in Waldenstrom's Macroglobulinemia (WM) in the second half of 2015. Data from the Diffuse Large B-Cell Lymphoma (DLBCL) trial of IMO-8400 is also expected in 2015; and also that of phase I trial of IMO-9200 for autoimmune disease. Potential autoimmune disease indication for IMO-9200 is yet to be announced, and is expected by year end or early next year.

Additionally, Idera will also unveil the plan of action for IMO-2055 after it demonstrated tumor related activity in the data analysis. This will result in the expansion of the clinical pipeline of Idera and it will re-enter into the cancer immunotherapy space. Phase II clinical trial for IMO-8400 for the treatment of dermatomyositis is also expected to begin in 2015.

The Big Catalyst

An important catalyst for Idera in year 2015 is the announcement of the two disease indications for the Gene Silencing Oligonucleotides (GSO) program. Clinical trials for these indications are expected to begin by the second half of 2015. These trials will garner increased investor attention based on the third generation antisense technology. Idera licensed its prior generation antisense technology to Isis Pharmaceuticals (NASDAQ:ISIS), which has grown to a billion dollar company. Thus, it is believed that with the GSO program Idera would be able to equate or even surpass the performance of Isis.

The GSO platform is based on the third generation antisense technology, with the aim to overcome the shortcomings of prior generation antisense technologies. The second generation antisense technology, antisense oligonucleotides (ASO), is the most successful and widely used chemistry, with one drug approved and approximately 95 candidates in various stages of clinical development. However, as effective as the ASOs may be it still has a number of short comings, which include lower potency requiring high dosage, difficulty in delivery leading to high injection site reactions, smaller duration of activity, and immunotoxicity caused by tissue development, among others. Idera proposes to overcome these limitations of ASO through the next generation GSO, based on their years of experience in antisense technology. The GSOs are designed as single stranded structures, which will result in greater potency requiring lower doses. The GSO is approximately 3 times as active as an ASO and 5 times as potent. However, typically higher doses mean more toxicity, but the GSOs lack the 5'-end thus avoiding the immune activation through toll-like receptors. Furthermore, the GSOs do not require specific vehicle for its delivery as the previous ASOs, rather they will be delivered systematically.

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Source: Idera's Presentation

The effect of GSO in mice-model was assessed against ASOs, with 0.5, 2, and 3 mg/kg of GSO and 0.5, 2, 5, 15, and 30 mg/kg of Antisense PS-oligo. GSOs showed higher potency at lower dose levels, as illustrated below.

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Source: Idera's Presentation

Similarly, at 5 mg/kg of GSO and 5 mg/kg of Antisense PS-oligo, the GSO showed activity at after up to 10 days of administration. However, at the same level of dosage the ASO showed activity for only 3 days after administration, as illustrated below.

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Source: Idera's Presentation

Thus, the GSO technology has the potential to turn the antisense technology around, and improve the shortcomings of prior generations. The developments on the GSO program will have a significant impact on the share price of Idera in 2015, with positive news boosting the share price.

Financials & Potential Risks

Idera has a cash burn of $1.81 million as of third quarter 2014, this leaves the company with approximately $52 million in cash, at the same level of operations. It's expected that the cash will last until 2016; I proposed that cash need would not arise for the next six to eight months, if there are no additional trials. However, all this could change based on the fact that Idera is expected to initiate a number of clinical trials in 2015 and this will deplete cash earlier than expected. It's expected to begin the GSO trials by second half of 2015, based on positive data; and with the positive results of previously discontinued IMO-2055, the company will also be looking at its development. Thus, in this case the company will need to raise additional funds, and since it has zero debt for the past four years, dilutive stock offering will be the way to go. A risk of dilution in the upcoming year is expected, which could be offset or delayed if they are able to enter into a collaboration for its future trials.

Bottom Line

The stock price for Idera has appreciated approximately 72% in the past three months. With the upcoming catalysts, this uptrend may continue into 2015. However, the company must improve its fundamentals to sustain its growth. The management shuffle in Idera is expected to better the growth prospects of the company. The appointment of Mr. Milano is indeed a boost, and a sale similar to ViroPharma may be in the cards for Idera as well, but in the longer run. However, not too much can be bet on a fate similar to ViroPharma, as Idera must perform well in its clinical trials to prove its worth.

Idera had previously licensed IMO-2055 to Merck KGaA for the development. This collaboration was terminated in November 2011, which lead Idera to reassume rights to IMO-2055. With positive preclinical data and the plan to initiate further development of the candidate, Idera may look for potential partners. Securing a collaboration would not only boost share price, but will also help funding of the development plan, and cut the need for dilutive stock offering in case Idera went into development on its own.

Assessing the prospects and potential of Idera, I remain strongly bullish. The GSO program, TLR candidates, potential collaboration, patent protection, experienced management, and positive data, all make this a good long-term investment. However, the risk of dilution and the inherent risk of failure in trials still exists, but the long-term reward in my opinion outweighs these risks.