26 Aug 2020 CMB International Securities | Equity Research | Coverage Initiation I -Mab BioPharma (IMAB US) BUY (Initiation) Innovation for biologics Target Price US$41.30 Up/Downside +36.29% Current Price US$30.30 I-Mab is well-positioned to become a biotech leader in China leveraging its innovative discovery expertise, fit-for-purpose technology platforms, biomarker-enabled translational medicine capabilities, and clinical China Healthcare Sector development capabilities. To date, I-Mab has developed an innovative pipeline of more than 10 clinical and pre-clinical stage assets through its Jill Wu, CFA internal R&D and in-licensing efforts. (852) 3900 0842 [email protected] Fully-integrated capabilities in R&D, business development, production and commercialization. I-Mab’s R&D capabilities encompass discovery, Sam Hu, PhD (852) 3900 0882 biologics CMC development, pre-clinical development and clinical [email protected] development with footprints in Shanghai, Beijing and the US. Meanwhile, leveraging its strong business development capabilities, I-Mab has completed several successful in-licensing and out-licensing deals. As for manufacturing, Mkt. Cap. (US$ mn) 1,752 I-Mab is currently using CDMOs and is establishing its own manufacturing Avg. 3mths t/o (US$ mn) 2.04 facility for the long term purpose. 52W High/Low (US$) 35.0/9.3 Total Issued Shares (mn) 58 Risk-balanced fast-to-market China strategy & fast-to-PoC global Source: Bloomberg strategy. I-Mab has built a risk-balanced pipeline portfolio on two pillars: 1) a Shareholding Structure fast-to-market China strategy, focusing on seeking opportunities to in-license Founders 3% the development and commercialization rights of investigational drugs from Pre-IPO investors 68% global biopharmaceutical companies, and 2) a fast-to-PoC (proof of concept) Other public shareholders 29% Source: Bloomberg global strategy, focusing on advancing its own novel or differentiated biologics towards clinical validation in the US. Share performance Absolute Relative Novel & highly differentiated biologics portfolio. TJ202, a highly 1-mth 7.3% -2.3% differentiated anti-CD38 antibody for MM, is undergoing two registrational 3-mth 42.3% 16.6% trials, including a third-line monotherapy trial and a second-line combination 6-mth 152.3% 104.4% Source: Bloomberg therapy trial, in MM in Taiwan and mainland China. For TJ101, a long-acting growth hormone, NMPA has accepted the IND application for a pivotal phase 12-mth price performance 3 trial in PGHD in Aug 2020. As for the global portfolio, TJM2, TJC4 and TJD5 (US$) imab US CCMP (rebased) are undergoing Phase 1 or Phase 2 clinical trials in the US. 35 30 Drug sales to start from 2021E. We forecast drug sales to start from 2021E 25 20 assuming TJM2 to receive US FDA’s approval for treatment of severe COVID- 15 19. We expect TJ202 to start commercialization in 2022E, TJ101 and TJC4 to 10 be launched in 2024E, and TJD5 to come to the market in 2025E. To factor in 5 0 the risk in drug development, we apply different probability of success (PoS) Jan-20 Apr-20 Jul-20 to our sales forecasts. We expect risk-adjusted revenue of RMB1,553mn/ Source: Bloomberg RMB806mn in FY2021E/22E. We forecast net losses of RMB1,092mn/ RMB634mn / RMB1,076mn in FY20E/21E/22E. Auditor: PWC Web-site: www.i-mabbiopharma.com Initiate at BUY. We use DCF method to value the Company and we derive TP of US$41.30 based on 15-year risk-adjusted DCF model (WACC: 10.60%, terminal growth rate: 3.0%). Risks: Delay in R&D process; Competition from peers. Earnings Summary (YE 31 Dec) FY18A FY19A FY20E FY21E FY22E Revenue (RMB mn) 54 30 0 1,533 806 YoY growth (%) 365 (44) (100) N/A (47) Net loss (RMB mn) (403) (1,452) (1,092) (634) (1,076) EPS (RMB per ADS) N/A N/A (18.88) (10.97) (18.60) R&D expenses (RMB mn) (426) (840) (900) (1,000) (1,000) Capex (RMB mn) (14) (12) (100) (100) (100) Source: Company data, CMBIS estimates PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 1 MORE REPORTS FROM BLOOMBERG: CMBR OR http://www.cmbi.com.hk 26 Aug 2020 Contents Investment Thesis .................................................................................... 4 Fully-integrated capabilities in R&D, production and commercialization ........... 4 Risk-balanced fast-to-market China strategy & fast-to-PoC global strategy ...... 4 Novel & highly differentiated biologics portfolio ................................................... 4 Drug sales to start from 2021E ................................................................................ 5 Initiate at BUY ............................................................................................................ 5 Investment risks ........................................................................................................ 5 I-Mab to fast develop its novel & highly differentiated biologics ........ 6 Risk-balanced fast-to-market China strategy & fast-to-PoC global strategy ...... 6 Fully-integrated capabilities in R&D, production and commercialization ........... 8 Supported by top-tier investors .............................................................................10 Tap the large immuno-oncology and autoimmune biologics market ................11 I-Mab’s China Portfolio .......................................................................... 13 TJ202 (MOR202), a CD38 antibody ....................................................... 13 TJ202 has superior safety and potent efficacy ....................................................13 Early clinical results demonstrated potent efficacy and good safety ...............14 Large potential in CD38 antibody market .............................................................18 Systemic Lupus Erythematosus is another potential indication .......................21 Expect RMB1.4bn risk-adjusted peak sales from TJ202 by 2035E ....................22 TJ101 (eftansomatropin), a long-acting growth hormone .................. 24 TJ101 is a potential highly differentiated long-acting growth hormone ............24 Large unmet need in PGHD market .......................................................................24 TJ101 showed comparable efficacy and satisfying safety .................................26 Expect RMB1.8bn risk-adjusted peak sales from TJ101 by 2035E ....................29 Enoblituzumab, a B7-H3 antibody ........................................................ 30 The most advanced clinical stage humanized B7-H3 antibody ..........................30 Early clinical results supports potential in combo regimens .............................31 SCCHN has large market potential for immunotherapies ...................................33 TJ301 (olamkicept), an IL-6 blocker ..................................................... 36 TJ301 is a potential highly differentiated IL-6 Blocker ........................................36 Preliminary clinical data showed favorable safety profile and encouraging efficacy ...................................................................................................................................36 Ulcerative Colitis has substantial unmet clinical need .......................................38 TJ107 (Efineptakin), a long-acting rhIL-7 ............................................. 41 TJ107 is a potential lymphocyte-booster for cancer related lymphopenia and immunotherapy ........................................................................................................41 PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 2 26 Aug 2020 Preliminary clinical results proved sustainable T cell stimulation ....................42 Cancer treatment-related lymphopenia occurs in many cancer patients .........43 I-Mab’s Global Portfolio ......................................................................... 45 TJC4, a highly differentiated CD47 antibody ....................................... 45 TJC4 has potential of minimizing hematologic side effects ...............................45 CD47-targeting therapies showed potent efficacy but with hematological toxicities ...................................................................................................................................46 TJC4’s preclinical results showed superior safety profile ..................................49 Expect RMB2.9bn risk-adjusted peak sales from TJC4 by 2035E ......................52 TJD5, a CD73 antibody .......................................................................... 55 A potential highly differentiated CD73 antibody for cancer treatment ..............55 TJD5 proved to have no “hook effect” ..................................................................56 Expect RMB1.5bn risk-adjusted peak sales from TJD5 by 2035E ......................58 TJM2, a GM-CSF antibody ..................................................................... 60 TJM2 is a potential therapy for COVID-19 and auto-immune diseases .............60 Early clinical studies showed good tolerability of TJM2 .....................................63 Expect RMB2.7bn risk-adjusted peak sales from TJM2 by 2035E .....................64 Preclinical assets ................................................................................... 66 Preclinical monoclonal antibodies ........................................................................66 Preclinical bi-specific antibody panel ...................................................................66 Financial Analysis .................................................................................