IPO Update: IGM Biosciences Files For $125 Million IPO

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About: IGM Biosciences (IGMS), Includes: ABBV, AMGN, AZN, BMY, MCK, NVS, PFE, REGN, ROG, XNCR
by: Donovan Jones
Summary

IGM Biosciences has filed updated plans for its IPO.

The firm is advancing a pipeline of antibody treatment candidates for blood cancers.

IGMS has still at pre-clinical stage, so the IPO is ultra-high-risk and may be more suitable for long-term institutional investors.

Quick Take

IGM Biosciences (IGMS) intends to raise $125 million from the sale of its common stock in an IPO, per an S-1/A registration statement.

The company is developing a pipeline of antibodies for the treatment of various blood cancers.

IGMS is still in pre-Phase 1 safety trial stage, so is an ultra-high-risk biopharma firm likely more suited to long-term hold institutional investors.

Company & Technology

Mountain View, California-based IGM was founded in 1993 as Palingen and currently develops engineered IgM antibodies for the treatment of cancer patients.

Management is headed by President and CEO Fred Schwarzer, who has been with the firm since 1999 and has previously founded Charter Life Sciences.

Management believes that IgM antibodies have inherent properties, namely 10 binding sites as compared to only two in IgG antibodies that provides them with a stronger binding affinity to cancer cells.

IGM Biosciences has developed a proprietary technology platform that is designed to be well-suited for development of T-cell [TC] engagers, receptor cross-linking agonists and targeted cytokines.

Below is a structural comparison of IgG and IgM antibodies:

Source: Company registration statement

The firm's lead drug candidate IGM-2323 is a bispecific TC-engaging IgM antibody designed to target CD20 and CD3 proteins that is currently in development for the treatment of relapsed/refractory B cell Non-Hodgkin’s lymphoma [NHL].

The firm's second drug candidate will be an IgM antibody targeting Death Receptor 5 [DR5] proteins, while management plans to file an investigational new drug application with the US FDA for the treatment of patients with solid and hematologic malignancies in 2020.

Below is the current status of the company’s drug development pipeline:

Source: Company registration statement

Investors in IGM Biosciences include Baker Brothers Advisors, Haldor Topsoe, Vivo Capital, Janus Henderson Investors, and Redmile Group. Source: Crunchbase

Market & Competition

According to a 2019 market research report by Market Research Future, the global chronic lymphocytic leukemia treatment market was valued at $7.9 billion in 2017 and is projected to grow at a very strong CAGR of 19% between 2018 and 2023.

The main factors driving forecasted market growth are the rising demand for effective treatments, increase in research and development expenditures, a rise in the older populations that are more susceptible to the disease and an increase in prevalence of chronic lymphocytic leukemia.

According to a report by the World Health Organization, the population of older adults is projected to surpass 2 billion by 2050.

The Asia-Pacific region is projected to grow at the fastest rate due to an increase in patient population.

Major competitors that provide or are developing treatments include:

Source: Sentieo

Financial Status

IGM’s recent financial results are typical of clinical stage biopharma firms in that they feature no revenue and significant R&D and G&A expenses associated with advancing a pipeline of treatment candidates.

Below are the company’s financial results for the past two and ½ years (Audited PCAOB for full years):

Source: Company registration statement

As of June 30, 2019, the company had $42.7 million in cash and $6.7 million in total liabilities. (Unaudited, interim)

IPO Details

IGMS intends to sell 7.8 million shares of common stock at a midpoint price of $16.00 per share for gross proceeds of approximately $125.0 million, not including the sale of customary underwriter options.

Certain existing shareholders have indicated an interest to purchase shares of up to $50 million in the aggregate at the IPO price. This investor ‘support’ is typical of successful life science IPOs and is a positive signal to prospective IPO investors.

Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 30.32%.

Per the firm’s most recent regulatory filing, it plans to use the net proceeds as follows:

We expect to use the net proceeds from this offering, together with our existing cash and cash equivalents, to fund: [i] the clinical development of IGM-2323 for the treatment of relapsed/refractory B cell NHL patients; [ii] IND-enabling studies and the clinical development of our DR5 IgM antibody; [iii] our ongoing efforts to develop additional clinical candidates from our IgM platform; and [iv] the build out and expansion of our manufacturing facilities, as well as for working capital and other general corporate purposes.

Management’s presentation of the company roadshow is available here.

Listed underwriters of the IPO are Jefferies, Piper Jaffray, Stifel, and Guggenheim Securities.

Commentary

IGMS is seeking public investment capital to advance its pipeline of blood cancer treatment candidates.

However, the firm is still in pre-Phase 1 safety trial stage for its trial programs, so we don’t even know if the antibodies are safe for human use yet.

The market opportunity for lymphoma cancer treatments is significant and growing rapidly as populations age worldwide and these types of cancers become more prevalent.

Management has disclosed no commercial collaborations and the industry for CLL treatment contains many large and well-funded competitors.

As to valuation, management is seeking an enterprise value of $330 million. While that is within a typical range for biopharma firms, it appears high given the company’s pre-clinical stage.

Additionally, management doesn’t expect an initial readout from Phase 1 safety trials until 2020, at the earliest.

Given the early stage of development, this ultra-high-risk biopharma IPO appears more suited to long-term hold institutional investors rather than individuals.

Expected IPO Pricing Date: September 17, 2019.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.