China Biotech Arrives: the IPO of I-Mab and the Push for Immuno-Oncology Domination in China

Jan 19, 2020 | China, Financing, Immuno-oncology, Immunotherapy, Investor Watch, IPO, Oncology, Pharma Watch

China Biotech Arrives the IPO of I-Mab and the Push for Immuno-Oncology Domination in China

China-based I-Mab (NASDAQ: IMAB), a clinical stage biopharmaceutical company committed to the discovery, development, and commercialization of novel or highly differentiated biologics to treat diseases with significant unmet needs—particularly cancers and autoimmune disorders—announced its initial public offering of floating 7.4 million shares of publicly traded stock at $14 raising $103.7 million.

TrialSite News looks into this venture to learn a little more about who they are and where they could be going. The joint book-running managers for this offering included Jefferies LLC and China International Capital Corporation Hong Kong Securities Limited. Lead managers for the offering included China Renaissance Securities (Hong Kong) Limited and Huatai Securities (USA).

When were they founded? 

2016

Why were they founded?

They were founded to capitalize on the confluence of the emergence of an attractive and growing biologics market in China and the revolutionary breakthroughs in cancer and autoimmune disease medicines.

What are the market opportunities in China?

They believe that breakthroughs in immuno-oncology and autoimmune biologics therapeutics in China will lead to robust and growing markets for their therapeutic products. Some key trends align in their favor, including 1) the incidence and mortality of cancers in China are on the rise even outpacing America and the rest of the world; 2) many innovative therapies for autoimmune disease and cancer approved in America and Europe are not available yet in China; 3) the Chinese government continues to demonstrate a commitment to not only open up but to modernize its regulatory regime—it seeks to streamline and simplify as it embarks on a program to make China the hub of global drug industry; 4) as a result of the great Chinese economic miracle, the increase in disposable income coupled with ongoing improvements in national health coverage and access establishes the conditions for a sustainable biologic drug market place; and 5) this market place, according to analyst firm Frost & Sullivan, will grow faster than the global biologics market equaling U.S. $189.4 billion by 2030 as measured in sales revenue.

Why do they believe they are differentiated?

They believe they are sufficiently positioned to emerge as a biotech leader in China due to 1) innovative discovery expertise, 2) fit-for-purpose technology platforms, 3) biomarker-enabled translational medicine capabilities, and 4) clinical development capabilities. The company declared to investors that these integrated capabilities plus their deep understanding of China’s biologics regulatory framework and their direct access to extensive pre-clinical and clinical trial resources in China position them above and beyond many competitors. These integrated capabilities and competitive advantages have led to real results: an innovative pipeline of over 10 pre-clinical and clinical stage assets through their internal research and development efforts and in-licensing arrangements with global biopharma industry sponsors.

What unique challenges do they face in China?

China represents a competitive and regulatory risk for investors that will lead to the need for significant capital raising ongoing, intense competition from both local and global firms, a less-streamlined regulatory pathway as compared to countries, such as the U.S. and implementation challenges, not to mention political and regulatory uncertainties (e.g. ongoing regulatory reform, etc.).

How do they plan on mitigating political and administrative risk concerning regulatory matters?

They are very mindful of the risks and challenges and carry-on ongoing mitigation measures via their internal R&D system integrating multi-functional aspects of their drug development process to proactively handle some of the regulatory challenges not to mention use investment, relationships and presence in their Beijing office to focus specifically on regulatory matters. Moreover, they declared to investors they have set up a healthy communication channel with Chinese regulatory agencies to discuss and resolve various regulatory issues promptly and effectively.

Why i-Mab?  What else differentiates them?

They report in investor disclosures that another Frost & Sullivan Report ranks i-Mab as a top clinical stage China-based immunology firm as measured by the innovative quality and number of investigational drugs and drug candidates under clinical and pre-clinical development in their pipeline, not to mention the amount of pre-IPO financing raised (in excess of $400 million in just three years); pre-IPO valuation and recognition and rewards by the biopharmaceutical industry—for instance, Genetic Engineering & Biotechnology News recognized them as a top 10 immuno-oncology start-up in the world. For that particular listing, they were the only China-based company.

Moreover, they have established an impressive global infrastructure in both China and America—covering research and development with discovery, biologics CMC development, pre-clinical development and clinical development with footprints in Shanghai, Beijing, and the United States.

What is their key high-level challenge facing them in the next couple of years?

They are now at a critical juncture and must make the transition from a clinical stage company into a fully integrated end-to-end global biopharma firm in the next few years.

What is their unique business model?

They have implemented what they position to investors is a unique business model built on two pillars, including 1) fast-to-market China strategy and 2) fast-to-PoC (proof of concept) global strategy. 

There are two strategies we will describe below which have generated two portfolios, including one focused on China and one on a Global reach. The company’s goal is to balance and hedge for risk as they seek to 1) develop novel and/or highly differentiated drugs, 2) efficiently advance their pipeline assets towards commercialization, and 3) mitigate and prepare for the inevitable development risks along the way. But of course, this is drug development, and they face inherent risks form the underlying science to regulatory challenges. The two-prong business model includes:

1) Fast-to-Market China Strategy represents their effort to gain strategic advantage in China as against competitors.  This means that first and foremost they must beat out competitors to seek out the best opportunities for in-license development and commercialization rights of investigational drugs for global biopharma companies for Greater China. They must apply a strategic criterion for any deal, ensuring that they only opt for investigational drugs with potential to become novel and highly differentiated medicines. They plan on leveraging their investments in China drug development and regulatory infrastructure (e.g. meet China’s National Medical Products Administration or NMPA) requirements for a turnkey operation to accelerate late-stage or registrational clinical development. They believe they turnkey novel and highly differentiated immune-oncology drug development to commercialization better than other China competitors or foreign biopharma firms because A) superior internal development capabilities, B) deep insight into China’s regulatory framework, and C) robust clinical network in China.

What is their evidence? They point to their innovative China portfolio consisting of five investigational drugs with an aim for near-term product launch. They note to investors that all of these pipeline drugs have achieved pre-set safety and preliminary efficacy endpoints in Phase I or Phase 2 clinical trials in Europe, America or elsewhere and are in transition to either Phase 2 or Phase 3 clinical trials in China. They offer examples of investigational products (TJ202 and TJ101) that are well positioned for a series of NDAs in China by 2021.

2) Fast-to-PoC Global Strategy focuses on advancing their own novel or differentiated biologics toward clinical validation in America. The strategy can be segmented into the following elements: 1) seek PoC of the drug candidates in the U.S. by conducting early phase clinical trials with a set of safety and efficacy endpoints while leveraging the FDA’s streamlined regulatory system for innovative drug development 2) leverage U.S. generated data to advanced clinical development in China which offers them advantages, including: A) access to China’s large patient pool, B) extensive clinical trial resources through collaborations with China’s leading hospitals, and C) capitalize on regulatory pathway for fast-track approval of drugs supported by solid overseas clinical data, which offers i-Mab the ability to out-license global rights (excluding China) of these targeted investigational drugs once validated in America. A key goal—offer the Chinese patient the benefit to access and benefit from advanced treatments concurrently or soon after market approvals.

They have created a global portfolio of two molecular classes, including 1) monoclonal antibodies and 2) bi-specific antibodies which have been developed internally. They claim that these molecules are highly innovative as compared to most competitors and they have three investigational drugs in the global portfolio (TJM2, TJC4 and TJD5) in Phase I clinical trials in America. Moreover, they secured NMPA IND approvals for TJC4 (7/19) and TJD4 (9/19).

Global Partnerships

The company has a successful track record, they position to investors, of in-licensing and out-licensing deals in pursuit of the strategy mentioned above. During the past three years, they have established more than 10 global and regional partnerships with reputable biopharma firms. They have built up their Chinese portfolio via in-licensing deals with global biotech partners, including MorphSys, Genexine, MacroGenics and Ferring. Out-licensing deals help them to focus and streamline pipeline on the most valuable assets. They also seek co-development deals to share development costs and risks, not to mention territorial and commercial rights with select partners. In the past two years, they have out-licensed three de-prioritized assets and initiated four co-development programs with partners including ABL Bio, Everest Medicines and WuXi Biologics. They note that revenues from out licensing and co-development partnerships will grow as the pipeline progresses.

There are many other facets to consider with i-Mab, including financials; but for purposes of this summary, we will conclude with an overview of their pipeline. In the end, this company will rise or fall as its various clinical development assets succeed or don’t succeed during clinical trials and ultimately with their regulatory approval.

What is their pipeline?

As we have discussed, i-Mab maintains a China Portfolio and a Global Portfolio. See the link for their pipeline. We include a table with some key clinical trials TrialSite News monitors ongoing. The more of these assets that progress successfully toward commercialization, the more value, all things being equal.

Drug CandidateNovelty/DifferentiationTherapeutic AreaGlobal PhaseChina Phase
TJ202Differentiated CD38 mAbShort infusion time (0.3 – 2 hrs), lower IRR (7%)
– Potential for SLE by targeting pathogenic B cells
Multiple myeloma /Autoimmune diseasesPhase 2Phase 3
TJ101Long-acting growth hormoneConvenient weekly dosing, better compliance
– Potential better safety over pegylated hGH
Pediatric growth
hormone deficiency  
Phase 2Phase 2
TJ301Differentiated soluble gp130IL-6 inhibitor– Novel MoA through trans-signaling pathway
– Better safety profile with highly differentiated potential
Ulcerative colitis /
Auto-immune disease
Phase 2Phase 2
EnoblituzumabMost advanced B7-H3 mAb– T cell activation combined with tumor killing
– MoA with broader tumor indications
Head and neck
cancer / Oncology
Phase 2Phase 2
TJ107Novel long-acting IL-7– Novel agent to treat cancers with lymphopenia
– Potential combo therapy with PD-1/PD-L1
Oncology-related
lymphopenia
Phase 2Phase 1

Current Financials

Investing in biotech ventures such as i-Mab is a high-risk affair—speculative and involves a substantial probability of losses. The company is new and has only lost money. The revenues they have generated from licensing deals is frankly de minimis as compared to their cost structure. Their articulated model will require tremendous ongoing investment and substantial capital raising.  If there are any hiccups in any one of their main clinical program’s, investors can easily become spooked while their core assumptions underlying their two-program business model presuppose an open spigot of capital flow. The numbers to date paint this risk as just in the first six months of 2019, they lost $124.9 million. They also lost a total of $58.7 million in 2018. As of the IPO, the investor disclosure revealed a cash position of $231 million. The stock was priced at $14 and has since gone down to $12.50. 

Risks for more financial Loss

As they seek to rapidly execute on their two-prong business model strategy, they will continue to incur significant losses as the following impacts the R&D efforts:

·       Clinical trials are expensive, and they are running them in China and the U.S

·       Manufacturing clinical trials materials via contract manufacturing organizations in and outside of China

·       Regulatory approvals for candidates take time, good clinical results and money

·       Commercialization activities are tremendously expensive as sales force needed as well as payer relationships

·       They must build up product manufacturing facilities if drugs approved (or they must enter into deals to count on others)

·       Many of the advanced therapy medicinal products (ATMPs) are new and not proven and may not work in later phase research or commercialization

·       Building up an adequate labor force in drug development is an incredibly costly business

·       Ongoing legal costs as they build and grow IP/portfolio—not to mention enforcing rights and licensing new advanced investigational therapies

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