IGMS - IGM Biosciences: High OpEx And Underwhelming Monotherapy Data Warrant Caution

2023-07-16 09:06:49 ET

Summary

• IGM Biosciences, developing IgM antibodies for various diseases, sees Q1 2023 cash decrease, but collaboration revenues rise.
• Imvotamab trial results disappoint; focus shifts to combination therapies, while IGM-8444, IGM-7354, IGM-2644 show potential.
• High operating costs and disappointing monotherapy data lead to "Hold" investment recommendation; waiting for more positive data.

Introduction

IGM Biosciences (IGMS), a clinical-stage biotechnology company, is developing IgM antibodies for potential treatments of cancer, autoimmune and inflammatory diseases, and infectious diseases. The company's proprietary IgM antibody platform is being used to formulate receptor agonists, T cell engagers, targeted cytokines, and neutralizers. Current clinical trials are being carried out on product candidates including IGM-8444, Imvotamab, IGM-7354, and IGM-2644, targeting various diseases and conditions. They also have IGM-2537 in their pipeline for treating specific types of leukemia. IGM Biosciences maintains a portfolio of patents and commercial rights globally, with exceptions for products co-developed with Sanofi.

Recent developments: Last month, IGM Biosciences priced its upsized public offering and a private placement, expecting approximately $107.3M in gross proceeds.

The following article provides an overview of IGM's financials and clinical prospects.

Q1 2023 Earnings

In Q1 2023 , IGM Biosciences had $373.4 million in cash and investments, a decrease from $427.2 million in Q4 2022. Collaboration revenues increased to $0.5 million, and R&D expenses rose to $50.9 million from $38.9 million in Q1 2022. G&A expenses remained steady at $13 million, and net loss stood at $59.3 million. For 2023, they expect operating expenses of $275-$285 million, including non-cash stock-based compensation of $45 million, and collaboration revenue of $3 million from Sanofi. The company anticipates ending the year with over $200 million in cash and investments, which will fund operations into Q4, 2024.

Pipeline Developments

IGM Biosciences is currently making progress with four different drug candidates , each targeting various conditions and at different stages of clinical trials. These candidates include IGM-8444, Imvotamab (formerly IGM-2323), IGM-7354, and IGM-2644.

Imvotamab, a bispecific T cell engager, is advancing towards clinical trials for severe systemic lupus erythematosus and severe rheumatoid arthritis. Promising preclinical data, including IND clearance and demonstrated tissue penetration, indicate its potential effectiveness in these autoimmune conditions where treatment options are currently limited. In 2021, IGM presented Phase 1 data involving 40 patients with advanced B cell malignancies. While no significant adverse events were reported, the efficacy data disappointed analysts and investors. Among the 38 patients evaluated, only 11 showed a response. In the group that received a 100 mg dose (n=10), half of the patients achieved complete responses . As a result, IGM has halted the development of Imvotamab as a monotherapy and is now evaluating it in combination with other cancer therapeutics.

IGM-8444 is an IgM agonist antibody designed to target death receptor 5 (DR5). It is currently undergoing evaluation in a randomized trial for metastatic colorectal cancer, and is also being tested in combination with other treatments for acute myeloid leukemia. The ongoing trials and the anticipated release of data in mid-2023 hold promise for potentially enhancing the treatment of colorectal cancer.

IGM-7354, an IgM targeted immunostimulatory IL-15 cytokine, is currently in Phase 1 trials for the treatment of solid tumors. With a significant need for effective treatments in solid tumors and observed cytotoxicity mediated by natural killer (NK) cells and CD8+ T cells in PD-L1-positive tumor cells, IGM-7354 has the potential to deliver transformative results.

Lastly, IGM-2644, a CD38 x CD3 IgM T cell engaging antibody, is on the verge of commencing a clinical trial for recurrent or refractory multiple myeloma. Its demonstrated potency in killing multiple myeloma cells suggests it could offer significant benefits in a disease characterized by high relapse rates.

My Analysis & Recommendation

In conclusion, my observation of IGM Biosciences' performance over the past year paints a picture of potential marred by difficulties. Its shares have nosedived nearly 50% in the last year, a trend that has caught the eye of many short-sellers, with a high short interest of 35%.

I cannot help but feel worried about the disappointing efficacy data of the Imvotamab monotherapy trials. Despite its initial promise, its underwhelming results in trials for advanced B cell malignancies raises concerns about the broader applicability of IGM's platform. The company's decision to halt Imvotamab as a monotherapy and instead investigate its use in combination therapies has possibly exacerbated these worries.

However, the collaboration with Sanofi provides a silver lining, lending some validation to IGM Biosciences' pipeline. Despite this validation, the company's high operating expenses remain a point of concern. The projected OpEx of between $275-$285 million for 2023 is daunting, especially for a biotech company in its early stages.

The company's other drug candidates—IGM-8444, IGM-7354, and IGM-2644—provide glimmers of hope. Their success in upcoming clinical trials could significantly validate IGM's platform and potentially lead to transformative treatments, particularly for colorectal cancer and solid tumors.

However, at this point, taking into account the high operating expenses, the underwhelming performance of Imvotamab as a monotherapy, and the stock's high volatility, my investment recommendation for IGM Biosciences is to "Hold". Despite the company's position to potentially bring game-changing treatments to market, I believe it's wise to wait for more positive data and improved fiscal discipline before making any drastic investment moves.

For further details see: