IGM Biosciences(IGMS) - 2023 Q4 - Annual Report

PART I Business IGM Biosciences is a clinical-stage biotechnology company developing IgM antibodies for cancer and autoimmune diseases, undergoing a strategic refocusing in late 2023 Overview * IGM Biosciences is a clinical-stage biotechnology company focused on developing IgM antibodies for cancer and autoimmune/inflammatory diseases[15] * Key product candidates in clinical testing include Aplitabart (DR5 agonist), Imvotamab (CD20 x CD3 bispecific), and IGM-2644 (CD38 x CD3 bispecific)[18] * In December 2023, the company announced a strategic refocusing to prioritize colorectal cancer and autoimmune diseases, while deprioritizing hematologic oncology and its targeted cytokine product candidate[16] Our Differentiated Approach and Proprietary Platform * The company's platform is based on IgM antibodies, which have 10 binding domains compared to 2 for traditional IgG antibodies, potentially resulting in greater binding strength (avidity) to target cells[20][22] * The potential advantages of IgM antibodies include enhanced cross-linking of cell surface receptors, stronger binding to targets, and a greater ability to utilize complement dependent cytotoxicity (CDC) for cell killing[23] * IGM has developed proprietary methods to overcome historical manufacturing difficulties, create engineered and bispecific IgMs, extend their half-life, and modulate their CDC mechanism[24][25] Our Development Programs * Aplitabart, an IgM antibody targeting Death Receptor 5 (DR5), is being evaluated in Phase 1 combination trials for metastatic colorectal cancer to induce apoptosis in cancer cells[30][32] * Imvotamab, a CD20 x CD3 bispecific T cell engaging IgM antibody, is in Phase 1b trials for severe systemic lupus erythematosus (SLE) and rheumatoid arthritis (RA), with a planned trial for myositis[34][39][40] * IGM-2644, a CD38 x CD3 bispecific T cell engaging IgM antibody, is planned for a Phase 1 trial in autoimmune diseases, targeting pathogenic plasma cells[41][18] Third-Party Agreements * In March 2022, IGM entered a global collaboration and license agreement with Sanofi to develop IgM antibodies for three oncology and three immunology targets[44] Sanofi Collaboration Financial Terms | Term | Amount/Details | | :--- | :--- | | Upfront Payment | $150.0 million (received May 2022) | | Potential Milestones (Oncology) | Up to $940.0 million per target | | Potential Milestones (Immunology) | Up to $1,065.0 million per target | | Profit Share (Oncology) | 50/50 in major markets (US, EU5, UK, Japan) | | Royalties (Oncology) | Tiered low double-digit to mid-teen % in other countries | | Royalties (Immunology) | Tiered high single-digit to low-teen % globally | * In January 2021, IGM entered an exclusive license agreement with Medivir AB for birinapant, paying $1.0 million upfront and a $1.5 million milestone, with up to $348.5 million in potential future milestones plus tiered royalties[60] Manufacturing and Supply * The company operates its own cGMP manufacturing facility for clinical trial materials while also relying on third-party contract manufacturers[61] * The manufacturing process utilizes Chinese hamster ovary (CHO) cells to produce IgM and bispecific IgM antibodies, followed by proprietary harvesting and purification methods[62] * Each product candidate is manufactured from a master cell bank, stored in two independent locations to mitigate loss risk[65] Competition * The company faces intense competition from major pharmaceutical and biotechnology companies with greater financial resources and experience, including AbbVie, Amgen, AstraZeneca, Bristol-Myers Squibb, Merck, Novartis, Pfizer, and Roche/Genentech[66][67][71] Competitors by Product Candidate Target | Product Candidate | Target | Key Competitors | | :--- | :--- | :--- | | Aplitabart | DR5 | AbbVie, Beijing Sunbio Biotech, Boehringer Ingelheim, Daiichi Sankyo, InhibRx | | Imvotamab | CD20 | Genmab/AbbVie, Regeneron, Roche/Genentech, Xencor/Janssen | | IGM-2644 | CD38 | Genmab, Ichnos Glenmark Innovation, Hi-Bio/I-Mab, Janssen, Sanofi, Xencor | Intellectual Property * As of December 31, 2023, the company's platform and manufacturing patent portfolio includes 15 patent families with 48 granted patents, projected to expire between 2034 and 2044[76] * The "Modified J Chain" patent family, a core platform component, covers IgM antibodies with a modified J chain for bispecific creation, with granted patents in the U.S., Europe, and China, expiring in April 2035[77] * The product candidate patent portfolio includes 27 families; Aplitabart (DR5) has three patent families expiring in 2036, 2039, and 2041, while Imvotamab (CD20xCD3) has two published families expiring in 2036[85][86][89] Government Regulation * The company's products are subject to extensive regulation by the FDA and other authorities, covering research, development, manufacturing, and marketing[97] * The U.S. approval process for biologics involves submitting an Investigational New Drug (IND) application, followed by Phase 1, 2, and 3 clinical trials, and finally a Biologics License Application (BLA)[98][104] * The company may utilize expedited FDA programs such as Fast Track, Breakthrough Therapy, and Accelerated Approval to accelerate development and review for qualifying product candidates[110][111][112] * Recent healthcare reforms, including the Inflation Reduction Act of 2022 (IRA), introduce measures like government price negotiation for certain Medicare drugs and inflation rebates, potentially impacting future product pricing and profitability[141] Employees and Human Capital * As of December 31, 2023, the company had 224 full-time employees, with 174 engaged in research and development[144] * In December 2023, the company announced a strategic refocusing that included a workforce reduction of approximately 22%[144] Risk Factors The company faces substantial risks from early-stage clinical development, novel IgM antibody therapeutics, intense competition, manufacturing complexities, and the need for significant additional funding * All product candidates are in early-stage clinical or preclinical development, and engineered IgM antibodies represent a novel, unproven therapeutic approach[153][156][159] * The company faces significant competition from entities with greater resources, and the complex manufacturing of IgM antibodies presents potential production and supply chain difficulties[153][190][196] * The company has incurred significant losses since inception, anticipates continued losses, and will require substantial additional funding to finance operations, which may not be available on acceptable terms[153][258] * Commercial success depends on the ability to operate without infringing third-party patents and to obtain, maintain, and enforce the company's own intellectual property rights[153][326][330] Cybersecurity The company integrates cybersecurity risk management into its overall system, with annual assessments, external consultants, 24x7 operations, and oversight by the Audit Committee * The company has integrated cybersecurity risk management into its overall systems, conducting annual risk assessments to identify and manage threats[404][405] * Governance is provided by the Audit Committee of the Board of Directors, with day-to-day management led by the SVP of Group Operations and a Cybersecurity Steering Committee[411][412] * The company utilizes external resources, including an experienced cybersecurity consultant and a 24x7 network and security operations center, to assist in designing, implementing, and monitoring its safeguards[408] Properties The company leases approximately 114,100 square feet of office, lab, and manufacturing space in California and Pennsylvania, with leases expiring between 2024 and 2032 * The company leases approximately 114,100 square feet of space in Mountain View, CA, and additional space in Doylestown, PA, with leases expiring between June 2024 and June 2032[415] Legal Proceedings The company is not currently a party to any material legal proceedings, though it may be involved in ordinary course business litigation * As of the report date, the company is not a party to any material legal proceedings[416] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under 'IGMS', has never paid dividends, and intends to retain earnings for future growth * The company's common stock trades on the Nasdaq Global Select Market under the symbol "IGMS"[420] * The company has never declared or paid cash dividends and does not anticipate doing so, intending to retain all future earnings for business growth[422] Management's Discussion and Analysis of Financial Condition and Results of Operations The company reported a net loss of $246.4 million in 2023, driven by increased R&D expenses, with $337.7 million in cash and a 22% workforce reduction due to strategic refocusing Results of Operations Comparison of Operations (2023 vs. 2022) | (in thousands) | 2023 | 2022 | Change (in thousands) | | :--- | :--- | :--- | :--- | | Collaboration revenue | $2,130 | $1,069 | $1,061 | | Research and development | $215,519 | $179,289 | $36,230 | | General and administrative | $50,072 | $49,736 | $336 | | Loss from operations | ($263,461) | ($227,956) | ($35,505) | | Interest income | $17,743 | $7,035 | $10,708 | | Net loss | ($246,416) | ($221,102) | ($25,314) | * The $36.2 million increase in R&D expenses in 2023 was driven by a $19.6 million rise in personnel-related costs, a $7.5 million increase in preclinical program expenses, and a $6.6 million increase in depreciation and facilities expenses[455][457][458][459] * Interest income increased by $10.7 million to $17.7 million in 2023, primarily due to higher yield rates on cash, cash equivalents, and marketable securities[461] Liquidity and Capital Resources * As of December 31, 2023, the company had $337.7 million in cash, cash equivalents, and marketable securities and an accumulated deficit of $821.2 million[464] * In July 2023, the company completed a public offering and concurrent private placement, raising net proceeds of $113.5 million[463] * Management believes existing cash resources are sufficient to fund planned operations for at least one year past the financial statements' issuance date[465] Summary of Cash Flows (2023 vs. 2022) | (in thousands) | 2023 (in thousands) | 2022 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | ($192,231) | ($5,853) | | Net cash provided by (used in) investing activities | $68,355 | ($225,644) | | Net cash provided by financing activities | $115,068 | $219,382 | Critical Accounting Policies and Use of Estimates * Key critical accounting policies involve significant management judgment and estimates, particularly in revenue recognition, accrued research and development expenses, and lease accounting[483][484] * For revenue recognition under collaboration agreements, management identifies performance obligations, estimates transaction price (including variable consideration), allocates it based on standalone selling prices, and recognizes revenue over time using a cost-based input method[485][486][488] * Accrued R&D expenses are estimated based on the progress of work completed by third-party service providers (CROs and CMOs), requiring judgment on the stage of completion and agreed-upon fees[489][490] Financial Statements and Supplementary Data The consolidated financial statements for IGM Biosciences, Inc. as of December 31, 2023, received an unqualified opinion, reporting $423.4 million in total assets and a net loss of $246.4 million Consolidated Balance Sheets Consolidated Balance Sheet Data (as of Dec 31) | (in thousands) | 2023 (in thousands) | 2022 (in thousands) | | :--- | :--- | :--- | | Cash, cash equivalents, and marketable securities | $337,677 | $427,162 | | Total assets | $423,411 | $513,499 | | Total liabilities | $220,177 | $226,236 | | Accumulated deficit | ($821,242) | ($574,826) | | Total stockholders' equity | $203,234 | $287,263 | Consolidated Statements of Operations Consolidated Statement of Operations Data (Year Ended Dec 31) | (in thousands, except per share data) | 2023 (in thousands) | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | :--- | | Collaboration revenue | $2,130 | $1,069 | $— | | Research and development | $215,519 | $179,289 | $127,026 | | General and administrative | $50,072 | $49,736 | $38,297 | | Net loss | ($246,416) | ($221,102) | ($165,164) | | Net loss per share, basic and diluted | ($4.71) | ($5.32) | ($4.93) | Consolidated Statements of Cash Flows Consolidated Statement of Cash Flows Data (Year Ended Dec 31) | (in thousands) | 2023 (in thousands) | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | ($192,231) | ($5,853) | ($124,982) | | Net cash provided by (used in) investing activities | $68,355 | ($225,644) | $15,461 | | Net cash provided by financing activities | $115,068 | $219,382 | $2,476 | Notes to Consolidated Financial Statements * Note 9 (Sanofi Agreement): The company received a $150.0 million upfront payment in May 2022, recognizing collaboration revenue of $2.1 million in 2023 and $1.1 million in 2022, with $146.8 million recorded as deferred revenue as of December 31, 2023[614][618] * Note 12 (Restructuring Charges): In connection with the December 2023 Strategic Refocusing and 22% workforce reduction, the company recognized restructuring charges of $1.8 million, primarily related to severance payments[646][647] * Note 13 (Income Taxes): As of December 31, 2023, the company had federal and state net operating loss (NOL) carryforwards of approximately $207.6 million and $423.8 million, respectively, with a full valuation allowance against net deferred tax assets due to cumulative losses[655][656] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with no auditor attestation required for the emerging growth company * Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2023[666] * Management concluded that the company's internal control over financial reporting was effective as of December 31, 2023[668] * The company is exempt from providing an auditor's attestation report on internal control over financial reporting as it qualifies as an "emerging growth company"[669] PART III Directors, Executive Officers, Corporate Governance, Executive Compensation, and Other Matters Information for Items 10-14, covering governance, compensation, and related matters, is incorporated by reference from the company's definitive 2024 Proxy Statement * Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's definitive Proxy Statement for the 2024 Annual Meeting of Stockholders[674][675][676] PART IV Exhibit and Financial Statement Schedules This section lists the financial statements and exhibits filed with the Form 10-K, with schedules omitted where not applicable or included elsewhere * This section lists the financial statements and exhibits filed with the Annual Report on Form 10-K[681]