IGM Biosciences (IGMS) was on everyone’s radar Tuesday, with shares flying higher by 140% at one point. If there is one segment of the market where shares can take off in such a manner, it is the biotech space, and that always comes hot on the heels of a highly positive development.
And obviously investors received one from IGM; Along with the business update, the company announced a major collaboration with French pharma giant Sanofi (SNY).
IGM is working on the development of IgM antibodies, and these have the potential to treat different types of cancers and other autoimmune diseases. Sanofi is evidently confident IGM’s drugs can have a meaningful impact.
For $150 million upfront and up to $6 billion in milestone payments from Sanofi, IGMS will develop 3 oncology and 3 inflammation targeting IgM agonist antibodies.
Should the cancer drugs get approved, the spoils will be split 50:50, while for the inflammation drugs, from the Phase 2 testing onwards, Sanofy will take hold of the reins and IGM will get a high-single-digit to low-teen royalty.
Looking at the deal, RBC’s Brian Abrahams applauds the “significant partnership.”
“We believe this deal provides key validation of [IGM’s] IgM platform in oncology and beyond by a highly credible partner, with a sizable upfront for an early-stage deal providing NT capital without giving away rights to the most advanced candidates, and potential for up to $6B in milestones helping sustain IGMS’ wholly-owned portfolio development and limit future dilution,” Abrahams opined.
However, the shares’ surge has taken them beyond Abrahams’ price target, and although the analyst thinks IGM’s platform’s long-term value “remains attractive,” for additional near-term upside, he believes “clarity on the competitiveness and differentiation of lead programs ‘2323 and ‘8444 will be important.”
As such, Abrahams reiterates a Hold rating on IGMS, while his $27 price target suggests a modest downside of 2% from current levels. (To watch Abrahams’ track record, click here)
However, Abrahams’ muted take is an anomaly on Wall Street. All 3 other recent reviews are positive, providing the stock with a Strong Buy consensus rating. Moreover, others see room for further gains; going by the $54.75 average target, shares could get an additional 86% boost in the year ahead. (See IGMS stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
