I-Mab Biopharma: Stock of the Week

Kate Lin: Of all the stocks we cover globally, the Chinese clinical-stage biotech firm I-Mab Biopharma (IMAB) is now among the cheapest stocks in the world. Trading at an 85% discount to Morningstar’s fair value estimate, shares in the company are priced at just one-third of our bear-case estimate.

The share price factors in only its domestic business, despite the fact that its innovative portfolio of differentiated candidates, such as its long-acting growth hormone and some cancer treatments, have global potential. 

But it’s not all positive news. While the valuation and outlook is attractive right now, there are some near-term risks with this company that investors should know about. 

Like many other clinical-stage biotech companies in the world, I-Mab's pipeline has suffered significant delays due to COVID and funding concerns, which means that it will have to avoid burning all the cash it has so that it will not eventually be forced to raise capital. This translates into less spending on research and development, which in turn delays its ability to commercialize products in initially estimated timelines. Simply put, investors in I-Mab may have to wait until 2027 before the company turns profitable.

Investors should also note that I-Mab does not have an economic moat. But what we are looking at is also how the company advances its pipeline candidates into later stages of development over the next five years. This presents a reasonable probability of I-Mab having a stronger competitive advantage then.

For Morningstar, I am Kate Lin.

 Bulls Say

• I-Mab has an innovative portfolio of differentiated candidates with global potential, including CD47 and CD73 inhibitors.
• The company’s strong early data validates its ability to apply rational drug design to create differentiated molecules.
• Unlike most Chinese biotechs, I-Mab is not heavily dependent on fast-follower or “me-too” drugs for the domestic market.

 Bears Say

• I-Mab’s global assets, CD47 and CD73, are still in phase 1 or phase 2 trials so there is still considerable uncertainty about their commercial potential.
• CD47's commercial potential is now questionable after AbbVie discontinued trials of lemzoparlimab in key indications.
• Investors may need to wait until 2027 before it turns a profit.