IGM Biosciences' stock tumbles as analysts weigh in on pivot plan with dismay

By Ciara Linnane

Truist and J.P. Morgan downgrade stock after news of shift away from oncology to focus on autoimmune diseases

IGM Biosciences Inc.'s stock tumbled 14% Tuesday, as analysts weighed in with dismay on the company's pivot away from oncology to a focus on autoimmune diseases, with at least two opting to lower their ratings.

Truist downgraded the stock (IGMS) to hold from buy on the news, which was announced late Monday, and halved its stock-price target to $12.

"While we think the opportunity is considerably larger than itsabandoned oncology efforts, data for T cell engages (TCEs) in autoimmune diseases is still very nascent, and physicians we have spoken to so far mostly have low expectations for the addressable patient population (5% in rheumatoid arthritis)," Truist analysts Asthika Goonewardene and Karina Rabayeva wrote in a note to clients.

J.P. Morgan analysts cut their rating to underweight - the equivalent of sell - from neutral and lowered their price target to $9 from $12.

"We now see a much more diminished upside catalyst outlook for [IGM] over the mid-term," wrote analyst Eric Joseph.

It's one that will concentrate on data from an early stage trial of the company's rheumatoid arthritis treatment imvotamab, "where the bar for a differentiated clinical profile is poorly defined," Joseph wrote.

IGM said it would prioritize its T cell-engaging IgM antibodies for the treatment of autoimmune diseases, including lupus and rheumatoid arthritis, and minimize future spending on aplitabart and other cancer treatments.

The company it made the decision in light of data from a randomized clinical trial of aplitabart in second-line metastatic colorectal cancer, along with the "significant" opportunity in autoimmunity. Final data from the trial will be shared in the future, but the company said it will cut its workforce and scale back spending on research and development of cancer drugs.

The company also announced a change of CEO, with Mary Beth Harler, an industry veteran who joined IGM in 2021 as president for autoimmunity and inflammation after more than a decade at Bristol Myers Squibb Co. (BMY), taking over from Fred Schwarzer.

Bruce Keyt, chief scientific officer, and Chris Takimoto, chief medical officer, also stepped down.

The company said the moves will extend its cash runway to 2027, but J.P. Morgan's Joseph said that was overly aggressive. "We see an unfavorable risk/reward profile for shares at current levels, notwithstanding recent volatility," he wrote.

Wedbush analysts were more upbeat, however, reiterating an outperform rating on the stock, while lowering their price target to $22 from $25.

"We continue to believe bispecific TCEs are a highly attractive modality for B cell-driven autoimmune diseases, and that IgM bispecifics may hold differentiated safety and efficacy vs IgG agents," analysts led by Robert Driscoll wrote in a note to clients.

IGM's stock has gained 69% in the year to date, while the SPDR S&P Biotech exchange-traded fund XBI has gained 8.5%, the iShares Biotechnology ETF IBB has gained 5.5% and the S&P 500 SPX has gained 19%.

-Ciara Linnane

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10-01-24 1141ET

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