IMAB - I-Mab: Why This Company Trades At A Third The Value Of Its Cash

2023-09-13 16:59:36 ET

Summary

• Chinese biotech company I-Mab faces challenges in attracting US capital due to lack of transparency and difficulty in valuing its pipeline.
• I-Mab has a late-stage pipeline with 20 assets and over $400 million in cash, but its market cap is only around $126 million.
• The company's advanced products, such as Felzartamab and Eftansomatropin Alfa, have limited trial data available, making it difficult for American investors to assess the company properly.

With a 20-asset late stage pipeline and $400mn+ in cash, but only ~$126mn market cap, I-Mab ( IMAB ) reflects the current conundrum of having Chinese biotech companies go public in the US. Whether it is newfound patriotism, or wariness about lack of transparency, or something else, my recent studies of Chinese Pharma in the US shows this pattern of ignorance and avoidance of many of these companies from US capital. Barring a few notable exceptions like Hutchmed (HCM), these Chinese companies are impossible to value because their pipeline or their assets do not reflect correctly on their market cap in the US.

Take IMAB here, for example. IMAB has some 11 product candidates in some 20 programs. 5 of these are "prioritized assets":-

• Felzartamab - Phase 3, Near BLA.

• Eftansomatropin Alfa - Phase 3, Near BLA.

• Lemzoparlimab - Phase 3.

• Uliledlimab - Pivotal Trial Planned in 2023.

• Givastomig - Phase 1.

Felzartamab is a differentiated CD38 antibody whose lead program is in multiple myeloma in a third line monotherapy setting targeting patients in China. Eftansomatropin Alfa is a differentiated long-acting growth hormone targeting pediatric patients as a monotherapy in China who have growth hormone deficiency. These two are phase 3 stage assets nearing BLA. Lemzoparlimab is a CD47 antibody targeting MDS in a first line setting in combination with azacitidine in China. Lemzoparlimab is running multiple phase 3 trials, as is Felzartamab. Uliledlimab is a phase 2 completed antiCD73 antibody targeting NSCLC in a 1L setting in combination with toripalimab. For a change, this is a global asset. It will commence a pivotal registrational trial this year.

Does this look like the pipeline of a ~$100mn market cap company?

I wanted to study the past trial data of these advanced products, but here's where American investors face their first hurdle - despite approaching a BLA, some of these products are notoriously difficult to find data for. Take Felzartamab, for example. This molecule was developed at MorphoSys, and was known as MOR202, so the data they have is from trials sponsored by MorphoSys. This is old data from 2017 and also as a combo therapy. It seems like good data, taken without context, and although it has passing relation to the program at hand, here's the MorphoSys Presents Updated Clinical Data for Anti-CD38 Antibody MOR202 in Multiple Myeloma at ASCO 2017 (news with additional features) :

Patients treated with MOR202 in combination with LEN/DEX had a median of three prior treatment regimens, 56% being refractory to at least one prior therapy. Median progression-free survival ((PFS)) was not yet reached, median follow-up was 7.5 months and 9 patients were still on study at data cut-off. 12 out of 17 patients (71%, based on the ITT population) reported an objective response ((OR)) to treatment, including one complete remission ((CR)), three very good partial responses (VGPR) and eight partial responses ((PR)).

Patients receiving MOR202 with POM/DEX, had a median of four prior treatment regimens, all being refractory to at least one prior therapy. Current median PFS is 17.5 months, with a median follow-up of 8.5 months. Eight patients were still on study at data cut-off. 6 out of 13 patients (46%, based on the ITT-population) showed an objective response, with two patients achieving a complete remission ((CR)).

Patients treated with MOR202 plus DEX had a median of five prior treatment regimens before study entry. Median PFS of this cohort was 4.7 months, with a median follow-up of 22.1 months. 5 out of 18 patients (28%, based on the ITT population) had an objective response.

So the combination therapy showed complete responses and "good" partial responses. Interestingly, though, LEX/DEX has shown CRs in other MM trials before. The point I am making is this, that it is difficult to find proper pedigree for some of these late stage programs at IMAB.

Take the other BLA-approaching asset, Eftansomatropin Alfa, which is a growth hormone. This molecule was discovered by a Korean company called Genexine and is being co-developed by Genexine and Handok, another Korean company. Here's its pedigree :

In October 2015, Genexine licensed the China rights to Tasgen Bio-tech (Tianjin) Co., Ltd. (which was subsequently renamed as I-Mab Bio-tech Tianjin Co., Ltd. and became I-Mab's subsidiary following an acquisition in 2017). In China, eftansomatropin alfa is also known as TJ101. Genexine retains all rights to the product outside of China in the rest of the world.

Here's a bit of data as well:

In the previous clinical trials, including a Phase 2 study in Europe, eftansomatropin alfa demonstrated its safety and clinical efficacy of weekly or biweekly regimens as compared to that of the daily injected rhGH (Genotropin®).

More recent data appeared last week:

Genexine Co. Ltd.'s recombinant human growth hormone eftansomatropin alfa (GX-H9/TJ-101) met the primary endpoint in a phase III pediatric study conducted in China in children with growth hormone deficiency, and the company plans to file a BLA in 2024 in China on the data.

I think the issue here is obvious: the data is either difficult to locate, or too old, or has dubious pedigree, or is from China. These things make it difficult for American investors to assess the company properly.

Interestingly, a lot of US analyst firms cover IMAB. Here's a list from the latest earnings call:

• Kelly Shi - Jefferies.

• Joe Catanzaro - Piper Sandler.

• Louise Chen - Cantor Fitzgerald.

• Gil Blum - Needham & Company.

• Andres Maldonado - H.C. Wainwright.

• Xiaoyi Qu - CICC.

• Bing Zhao - China Renaissance.

• Zhuxuan Jiang - CITIC Securities.

IMAB had a major collaboration with AbbVie from 2020 for Lemzoparlimab, however, in 2022, AbbVie began moving away from the asset after a poor tox profile demonstrated at ASCO last year. There were "70% and 50% rates of anemia and thrombocytopenia respectively in an azacitidine combo in MDS." While development continues in China, AbbVie isn't pursuing the global program any longer. The upfront payment AbbVie paid to IMAB in 2020 was more than their current market cap.

Financials

IMAB has a market cap of $126mn and a cash balance of $414mn. Research and development expenses for the first six months of 2023 were $61.6 million, while G&A expenses were $33.8mn. At that rate, they have a cash balance of 7-8 quarters.

Nearly two years ago, the company's last CEO, Joan Shen, left the company. Ms. Shen had considerable experience with "Western" biotech, but most of that experience seems to have been in China. After 18 months, in June this year, the company hired Raj Kannan, an industry veteran who has founded, run and successfully sold two biopharma companies in his career, and has considerable US experience. I think that with Mr. Kannan's entry, IMAB will find much needed transparency in its financial and clinical aspects.

Risks

The risks are obvious - lack of clarity, surprisingly low market interest vis-a-vis large cash balance, ex-US trials and ex-US markets that have ceased to interest American investors these days, and some poor toxicity data from one of the lead candidates. These last few years, especially after the coronavirus, the FDA, too, has put its foot down on ex-US trial data for US approvals, although, like we saw, most of these assets are not even vying for US approval.

Bottom Line

It is unfortunate how innovation, where there is any, is being subsumed under a cloud of opacity. US investors wanting to diversify would have liked to invest in these markets. However, the presentation is not clear, and the value proposition is hidden behind the risks I mentioned above. I will stay away.

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