GCVRZ - IGM Biosciences Looks Attractive Before Phase 2 Readout

2023-03-13 08:00:00 ET

Summary

• IGM Biosciences, Inc. is a leader in IgM antibody development.
• It stuck a major deal with Sanofi last year.
• Decent data, proof of concept, and good cash runway make IGM Biosciences, Inc. attractive.

Just a year ago, I covered IGM Biosciences, Inc. ( IGMS ), a leader in the development of extended half-life IgM antibodies, or immunoglobulins. I wrote that while I liked the science behind the company, its trials did not pan out, so I do not see an investment here. However, the stock has been up 40% since then, so there in fact was an investment that I missed. I want to explore what happened with the company and its trials to keep it buoyant, and whether there’s any further investment potential.

IGM develops extended half-life IgM antibodies. IgM is a more complex hexamer structure than the simple monomer structure of IgG, and it is an ancient antibody preserved across vertebrates, many of which had much stronger immune systems than humans; IgM is thought to have higher avidity as a result of its complex structure and all those additional binding domains. Despite this and other excellent therapeutic properties, IgM’s lower half-life precluded it from being explored as a therapeutic target previously. IGM’s key USP is in extending IgM’s half-life to make it more amenable to therapeutic applications.

Lead product candidate IGM-2323 is a bispecific T cell engaging IgM antibody, IGM-2323 targets CD20 which occurs on the malignant cell surface and CD3 on the T cell surface. This was in a phase 1 trial last year. In my previous coverage, I discussed the data from that trial. I noted that while data they presented at ASH2020 and ASH2021 did not differentiate the molecule enough, for example, say, with mosunetuzumab, Roche's ( RHHBY , RHHBF ) anti-CD20 bispecific antibody, I also noted the following about the data in iNHL:

What is most interesting is that in the indolent NHL cohort, there were 2 CRs at the 100 mg dosage in the FL cohort, with one more CR in the 300 mg cohort and one PR in the less than 100 mg cohort. In MZL, too, there was 1 CR in the less than 100 mg cohort.

This is important, because while iNHL represents 40% of all B cell NHLs, it generally is incurable at advanced stages with current standards of care. Aggressive B cell NHL has broadly effective treatment with rituximab, high dose chemo or bone marrow transplants, with a 50-70% cure rate, but there's nothing much for iNHL, which makes the above results in the iNHL cohort interesting.

In November, the company further announced that updated data from the Phase 1 Trial of Imvotamab demonstrates durable benefit for R/R NHL patients, with 7/8 Complete Response Patients Tumor Free after 1 Year. The company plans to provide a phase 2 safety and efficacy update within this quarter.

In March 2022, Sanofi (SNY) signed a large, potentially $6bn deal with IGM for “IgM antibody agonists against three oncology targets and three autoimmune/inflammation targets based on IGM’s proprietary IgM antibody technology platform.” Sanofi also paid $150mn in upfront payment, purchased $100mn of non-voting IGM stocks, and the two companies agreed to a 50:50 cost and profit sharing in the U.S. in oncology, tiered royalties and so on. Stifel and BofA analysts had good things to say about the Sanofi deal, Stifel calling it an inflection point that:

...fortifies the balance sheet, highlights the scarcity value of the company's platform and the mechanistic/biologic advantage of leveraging IgM-based antibodies to agonize specific receptor subclasses in oncology and immunology/autoimmune disease, and creates significant longer-term pipeline and balance sheet optionality while also aligning with the company's previously-articulated business development philosophy.

Analyst Geoff Meacham of BofA commented on the stronger avidity of the IgM molecules due to more binding units, and noted the leadership position IGM occupies in the space. He also said the lead molecule imvotamab did well in the phase 1 trial, and if things go well, the company can earn a considerable amount of money from Sanofi.

In January, IGM initiated the first clinical study of an IgM-targeted immune cytokine by dosing the first patient in a phase 1 trial of IGM-7354 in various solid tumors that are “incurable, locally advanced or metastatic solid tumors for which standard therapies are not available, are no longer effective, are not tolerated, or have been declined by the participant.” IGM-7354 is a targeted IL-15/IL-15R IgM antibody. In the study, IGM-7354 is administered intravenously as a monotherapy.

Financials

IGMS has a market cap of $926mn, a short interest of over 40%, and a cash balance of $469mn, made possible by the Sanofi deal. For the third quarter of 2022, R&D expenses were $48.2 million, while G&A expenses were $12.7 million. Even at that rate, the company has enough cash to last 7-8 quarters, which should be enough time to progress the Sanofi programs to enable the company to secure additional milestone payments. Thus, IGMS appears to be financially secure at this time.

Bottom Line

So the spike in IGM Biosciences, Inc. appears to be due to the Sanofi deal, which happened right after my coverage last year. Sanofi clearly sees potential in IGMS. My last report covered the solid data, but noted the lack of competitive differences in the particular indication. Upon further consideration, however, I think more than a specific indication, the proof of the IgM concept is what matters more, and this, the company has delivered more than adequately.

If you believe in the science, and given IGM Biosciences, Inc. has solid funds, this is an attractive investment right before phase 2 data readout takes it to a different level. The price is also just about midway of their 52-week range, which I consider a decent entry point for IGM Biosciences, Inc.

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