- Immuron is an Australian quoted biopharma company with a US ADR program
- Both the Immuron ASX stock and the US ADR have jumped on news of a US DoD contract
- The big question is, how far will this rerating run for Immuron?
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Immuron Ltd (ASX: IMC) shares and the Immuron ADR (NASDAQ: IMRN) have both jumped this morning on the back of a contract announcement. The US Department of Defence has dropped an interesting research contract onto Immuron. OK, so it’s only worth $6.2 million directly but there could well be knock-on effects.
Immuron is a biopharma company looking at dairy-derived products for the treatment of certain intestinal problems. Things like fatty liver and clostridium difficule for example. It’s been around for some time and if we’re to be fair – even if we’re to be fair – Immuron hasn’t been setting the stock market alight over that timespan.
The last annual revenue was A$ 145k and with an $8 million loss on that to boot. But then pharma development always does require swallowing large amounts of capital before something, if anything, is to be found. By the American measure, the corporate capitalisation for Immuron is some $15 million.
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So, we can see that a $6.2 million research contract with US DoD is an important event for Immuron – it is, in the technical jargon, a material event. The full Immuron announcement is here.
As traders what we want to know is, well, how far is this going to go? Immuron shares jumped from the 9 cents to 12 cents level on the ASK on the back of the announcement. The ADR in the US has been recorded as rising by as much as 60% premarket. So, what seems to be happening is that the ASX reaction was only a part of it – the revaluation is continuing in that other time zone. One question is therefore how far is that going to go? Are we going to see a feedback event here, as the Immuron ADR price rise feeds back into the ASX stock as that market opens again and perhaps around for another time?
It’s also true that this could be just the beginning. Sure, a $6.2 million contract is nice. But it’s worth recalling how those work. DoD pays for the work but anything that results from it remains with the company. So, if there’s success here there will presumably be orders from DoD but that same intellectual property can also be sold elsewhere.
Finally, a DoD contract like this can be seen as a form of validation of the Immuron approach itself. If there’s something interesting enough for DoD to pay for further research, well, there’s something interesting there, isn’t there?
It’s possible therefore that there will be a substantial revaluation of Immuron’s entire prospects. It’s also possible that there will be a fallback in the share price as the initial excitement fades. But then that’s what trading positions are built upon, forecasts of which way it’s going to go.