ImmunoCellular Therapeutics Ltd (NYSEMKT:IMUC) Is A Near Term Bounce Play

ImmunoCellular Therapeutics Ltd (NYSEMKT:IMUC) has taken a beating over the last few months. Currently, the company trades for a little over $1.02 a share, down 50% year-to-date and more than 35% across the last 30 days alone. Go back 12 months, and this decline rises to more than 90%. Shareholders aren’t happy and sentiment is weak. This is one we have looked at on a number of occasions in the past, and as our regular readers will know, the primary problem here is not one of science or technology but one of capital resource and structure issues.The company is in the early stages of a slow burning trial, a trial that is costing millions quarterly to conduct, but has essentially run out of cash. Not just that, but it keeps running out of cash and keeps having to raise just enough to tack together a few quarters’ worth of research and development costs before having to raise again. Each time it raises cash, shareholders get diluted, and the path back to profitability on an exposure lengthens a little.We think that there may be some near-term reprieve on offer for shareholders. Additionally, we think there’s an opportunity to pick up an exposure to this reprieve for those not yet in the stock.Here’s what we’re looking at.Before getting into our thesis, it is worth noting that the company just registered to raise around $5 million through preferred stock issue. Again, therefore, near term, we’re looking at some increased potential for dilution added to the equation. If the capital can carry the company through to one of the catalysts we are looking to as potentially inducing some upside momentum in the stock, however, this potential is mitigated considerably when considered as part of a risk/reward profile.Put simply, there looks to be no chance that this company can carry its phase 3 trial through to completion on its own. If it does, shareholders are going to be diluted to the point of practical non-existence through various equity issues spread across the next three years. It’s just not an option.What is an option, on the other hand, is a sale of the assets under investigation (ICT-107), or a partnership that brings with it an injection of capital and a collaboration through to study completion. In the latter of these two scenarios, ImmunoCellular will have to divest some of its future revenues to the partner entity, but that’s very much the lesser of two or three different potential evils in this situation.We know management is actively seeking both of these outcomes right now. Here’s a quote from the latest filing:

“…our board of directors has undertaken a strategic review to determine the feasibility of continuing to execute this trial independently or completing development through a partnership or acquisition of the asset.”

We also know that one such collaboration is already in motion:

“In March 2017, we announced the signing of a non-binding letter of intent with Memgen, LLC to exclusively negotiate the terms to possibly establish an immuno-oncology strategic collaboration focused on conducting clinical trials combining the companies’ respective cancer immunotherapy product candidates.”

This latter Memgen deal could bring with it a bit of capital and a nice bounce, but we’d love to see the company also pick up a partner that’s willing to carry the asset through to completion on the current phase III (the monotherapy study). Why? Because any Memgen combo effort is going to need to start back at phase I, meaning it doesn’t really solve the problem at hand. It does, in the sense that it should add some much-needed cash to the balance sheet, but it’s basically just bridging the gap until one of the above two mentioned outcomes (partnership on the phase III or outright asset acquisition) comes to fruition.So why are we looking at this one now?Well, because operationally the company is pretty much on hold until one of these outcomes materializes. Management focus right now is getting some funding for the phase III completion, in whatever form, and that’s almost certainly going to be the next announcement from ImmunoCellular. The company is setting up to present at Marcum tomorrow; this, for us, is a sales pitch to a potential deal maker. If the presentation goes well (and readers should keep in mind here that the asset we’re talking about is strong and promising in a currently unmet area of oncology) then it could spawn the resolution to the company’s problems.We’re not saying this is a sure thing – far from it. This company has big problems and, as current shareholders know, isn’t an easy one to hold an exposure to. It’s also got a great pipeline, however, and an ongoing late-stage trial in what amounts to a potentially $700 million peak sales asset.A punt, but one well worth considering ahead of some near-term resolution news.Be sure to catch up on all the details from our previous coverage here before acting.We will be updating our subscribers as soon as we know more. For the latest updates on IMUC, sign up below!Disclosure: We have no position in IMUC and have not been compensated for this article.