Event - Intercell approval deadline looms

Analysis

Like many other biotechs Intercell has seen its shares take a thorough pounding in the last few weeks, but unlike other companies the Vienna-based vaccine maker might be in line for some good news in the next few weeks in the form of a US marketing decision on its Japanese Encephalitis vaccine, Ixiaro.

While the approval had previously been priced into the shares, the turbulence in the markets could mean that the authorisation will have more of an impact on the stock than it would have done, prior to the last two week’s market meltdown. Today, Intercell shares were up 20% at €21.53, leading the Dow Jones Stoxx’s European healthcare Index, which was only up by 4%.

Alongside potential further rises in the share price on the day of approval, the green light from the US will importantly strengthen confidence in the group’s product development and its ability to get drugs to the market. This will help given that Intercell now has nine products in phase II trials. 

Military might

If it is approved Ixiaro is guaranteed to get a good start in life. The US military is already lining up to get supplies of the vaccine as soon as it gets approval. As well as the regular income from military sales, Intercell’s licensing partner, Novartis, plans to launch the drug in the US tourist market in the first quarter of next year.

Additional upside will also come with the group finding a licensing partner in Japan, as will approval of the jab for children. Paediatric phase III trials are expected to start by the end of this year. European approval is also expected in the second half of next year.

With so much news flow and potential catalysts for Ixiaro, it is not surprising that it is Intercell’s most valuable product, worth $1.5bn to the group, according EvaluatePharma’s NPV Analyzer. This compares with Intercell’s market capitalisation on Friday of $1.26bn.

While many are expecting approval to be a formality as the FDA has also passed the group’s production site in Scotland, if in any unlikely event the regulator decided not to approve the drug or delay it the impact on Intercell shares would be significant.

Fall back position

But as previously mentioned the group does still have another nine products in phase II development, including two products from its recent purchase of US company, Iomai, for $189m, (Intercell’s smart move for Iomai, May 13, 2008), it also has about $385m in cash on its balance sheet, which would provide much better cushions to any regulatory hiccups than other companies have.

The various projects are also expected to generate their own news in the coming months. V710, the Staphylococcus vaccine, which is partnered with Merck & Co, is expected to report phase II results by the end of the year or early 2009, with phase III trials expected before the middle of the year and potential launch in 2011.

The Pseudomonas aeruginosa vaccine for hospital acquired infections is also scheduled to start phase III trials during 2009. The drug is partnered with Novartis, which is also expected to start phase II trials of Intercell’s IC31 adjuvant in conjunction with its seasonal flu vaccines during the 2008/2009 flu season.

So while the success of Ixiaro will be a transformational event for Intercell, the group does have several other strings to its bow.

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