Immix Biopharma — Fresh faces with a unique tissue-targeting therapy

Founded in 2012 and listed on the Nasdaq in December 2021, Immix Biopharma is an early-stage, US-based biotechnology company focused on the development of TSTx produced by its SMARxT tissue-specific platform. The company’s lead asset, IMX-110, uses negatively charged TSTx encapsulating a synergistic combination of poly-kinase inhibitor (polyphenol curcuminoid complex, or PCC) and apoptosis inducer (PEG-PE doxorubicin complex) that delivers drugs specifically to tumour sites, inhibiting multiple kinases and interfering with NF-κB and STAT3 activation, interrupting the cancer-sustaining inflammatory cycle. Preliminary results from the ongoing Phase Ib trial of IMX-110 (NCT03382340) demonstrated promising safety and efficacy profiles in a subset of enrolled patients. The company is now preparing to start the Phase IIa portion of this trial in STS. We note that Phase Ib data were collected from a small subset of the trial population and the results should therefore be generalised with caution. Management expects that rolling data readouts from the Phase IIa trial (expected to begin enrolment in Q422) over FY23 and FY24 (with full results expected in Q424) could form the basis for accelerated approval in the United States, if positive. We believe these data readouts could be significant near-term catalysts for the company.

Immix is also preparing to initiate a Phase Ib dose finding study of IMX-110, in solid tumour indications, in combination with BeiGene’s ICI tislelizumab. The study is expected to begin in Q422 and will be run under a clinical trial supply agreement for tislelizumab with BeiGene, which we believe provides a significant strategic advantage for the company. We expect Immix will pursue a development/commercialisation licensing deal for IMX-110, assuming positive readouts.

We value Immix Biopharma at US$56.7m or US$4.1 per share. Our valuation is based on a risk-adjusted NPV calculation for IMX-110 in STS (rNPV US$26.9m or US$1.9 per share) and solid tumour indications (rNPV US$11.4m or US$0.8 per share) and incorporates a net cash position of US$18.4m at end-June 2022. In our valuation we apply a discount rate of 12.5% and assume a full licencing deal for IMX-110 is attained in mid-2025, after results from the combination and monotherapy studies. Additionally, we apply a probability of success of 15% to IMX-110 monotherapy in STS and 10% in solid tumour indications.

After listing on the Nasdaq in December 2021 (raising net proceeds of US$18.65m), the company reported a cash position of US$18.40m at end-H122 with no debt. We anticipate a large rise in R&D expenses to FY24 as clinical activities increase. The company reported R&D expenses in H122 of US$1.24m and a cash burn rate of US$2.04m; therefore we estimate the company’s operations are funded to Q424. Past this, we anticipate the company will need to raise additional capital to support operations until a licensing deal for IMX-110 can be found, which we estimate to be in mid-2025. Management has communicated an R&D budget of US$11m for the development of IMX-110 in two clinical trials, significantly below industry averages.

Immix Biopharma is subject to the regular risks associated with drug research and development. As a pureplay biotech, the company will be affected by development delays or failures, regulatory risks, competitor successes, partnering setbacks and financing risks. The largest development sensitivities relate to the company’s lead clinical asset, IMX-110. The most prominent near-term risk would be failure to demonstrate clinical proof-of-concept in its upcoming Phase IIa trial. While the company has reported encouraging interim trial readouts with IMX-110, data was collected from a small, heavily treated patient group. First-line patients, the target population for Phase II development, may exhibit significantly different responses.

Immix Biopharma’s clinical development strategy is primarily focused on IMX-110. Data from the company’s ongoing Phase Ib (NCT03382340) dose finding study has allowed the commencement of preparations for the Phase IIa proof-of-concept stage of this trial (expected to begin Q422) investigating the use of IMX-110 as a first-line treatment for STS. In a second approach, Immix Biopharma will assess IMX-110 in combination with the anti-PD-1 ICI tislelizumab (BeiGene) in solid tumour indications. The Phase I study is expected to begin in Q422 and will be coordinated through a collaboration between Immix Biopharma and BeiGene. We believe this is a favourable development as combinational therapy approaches could potentially open future development and/or licensing opportunities. Additionally, the benefit of combinational therapy regimens is becoming increasingly relevant in oncology (see our Edison prospectus on the oncology landscape).

The company also has two preclinical assets, IMX-111 and IMX-120. Like IMX-110, IMX-111 and IMX-120 are built on its SMARxT tissue-specific platform, and are in preclinical development as potential treatments for the large-market indications colorectal cancer and inflammatory bowel disease, respectively.

STS is a rare type of cancer affecting the tissues that connect, support and surround other body structures and organs. In the United States, 13,190 people will be diagnosed with STS in 2022 with an expected 5,130 deaths. There are approximately 160,079 people living with STS in the US. In Europe, approximately 21,500 people are diagnosed with STS each year.

In STS, the current first-line SoC is doxorubicin, a chemotherapy agent that suffers from low response rates and limited utility due to off-target toxicity. Immix Biopharma aims to address these problems through IMX-110’s unique tumour-specific delivery mechanism. We believe the lack of safe, tolerable and effective therapies in STS represents a significant unmet medical need. Additionally, EvaluatePharma estimates that the market for STS treatment will reach US$565m by 2028 and is highly fragmented, which we believe provides an opportunity for Immix Biopharma as it may be able to garner significant market share, including potentially IMX-110 as a first-line therapy.

IMX-110 has received orphan drug designation (ODD) for the treatment of STS as well as rare paediatric disease designation (RPDD) by the US FDA for the treatment of rhabdomyosarcoma, another type of rare soft tissue cancer in children. An RPDD qualifies Immix Biopharma to receive fast track review, and a priority review voucher (PRV), upon approval of IMX-110. A PRV entitles the holder to an expedited six-month review of a new drug application by the FDA. Notably, PRVs are tradable assets that regularly fetch upwards of US$100m in value.

Several market-leading ICIs are currently in clinical development targeting STS, primarily in combination with another treatment, including Merck’s pembrolizumab (Keytruda, Phase II), Bristol Myers Squibb’s nivolumab (Opdivo, Phase II) and Roche’s atezolizumab (Tecentriq, Phase II). The potential expansion of approval into STS of any of these drugs, we believe, would have a profound impact on the shape of the market and competitive landscape. However, we believe positive results from these studies may be beneficial for Immix, as the company is also investigating IMX-110 in combination with ICI therapies.

We note that annual sales of Merck’s pembrolizumab (Keytruda) and Bristol Myers Squibb’s nivolumab (Opdivo) are $17bn and $7.5bn, respectively, representing significant market potential for IMX-110 in combination with ICI therapies in further indications.

The company expects rolling interim readouts from the key Phase IIa study of IMX-110 in STS throughout FY23, which will be critical in establishing the drug’s clinical utility. We believe a licensing deal will be key for further clinical development and eventual commercial success of IMX-110, particularly as the asset advances into subsequent capital-intensive clinical trials. While clinical partners are yet to be identified, we expect the company’s collaboration with BeiGene may open opportunities for future licensing deals should clinical efficacy be demonstrated.

Immix Biopharma possess an extensive global patent portfolio consisting of 11 granted US and foreign patents, four pending US and foreign patent applications and two provisional US patent applications related to its TSTx platform and product line. The company’s strategy is to create multi-layered IP protection, which covers formulations, manufacturing methods, methods of use and functional characteristics of its product candidates. Importantly, Immix Biopharma’s granted US patent for the treatment of cancers with its micellular technology (US 2015O110877A1) is expected to provide market protection for IMX-110 until 2033. IMX-110 has also been awarded an ODD, securing the company a minimum of seven years market exclusivity in the United States.

Solid tumour growth is supported by new blood vessel formation initiated through inflammatory signals (cytokines and others) induced by tumour hypoxia and acidosis. This hypoxia and acidosis upregulates NF-κB, STAT3 and other transcriptional factors causing a sustained immuno-dysregulated environment. This immuno-dysregulated environment is called the tumour microenvironment (TME) and is made up on a packed mass of three components: 1) cancer-associated fibroblasts (CAFs), 2) tumour-associated macrophages/immune cells (TAMs) and 3) cancer itself. The TME feeds and sustains the tumour. Management believes that all three components of the TME must be addressed to treat the tumour and that conventional therapies have been hampered by resistance caused by NF-κB and STAT3 activation.

IMX-110 contains two active payloads, a poly-kinase inhibitor (PCC) and apoptosis inducer PEG-PE doxorubicin. Management asserts that this combination targets all three components of the TME: CAFs, TAMs and the cancer cells themselves, as shown on Exhibit 4. CAFs regulate tumour occurrence and therapeutic resistance, while TAMs are key cells involved in creating an immunosuppressive TME.

IMX-110’s potential to deliver its poly-kinase inhibitor to all three components of the TME is designed to disrupt the essential physiological network between the tumour and its metabolic and structural support, inhibiting multiple kinases and interfering with NF-κB and STAT3 activation (‘surround’), resulting in cancer cell death and tumour shrinkage.

With tumour-sustaining inflammation halted, IMX-110’s apoptosis inducer is then able to induce tumour cell death where conventional therapies have been hampered by resistance caused by NF-κB and STAT3 activation (‘conquer’).

We note that targeted therapies often offer the potential to widen the therapeutic window, meaning larger doses of drugs can be used with a potentially safer profile. The company has not yet confirmed IMX-110’s ability to do this. However, we see it as a possibility that management could choose to investigate.

Immix Biopharma’s IMX-110 has three key unique characteristics: first, it is the first micelle with ‘small molecule penetration’, which allows it to exit perforated tumour blood vessels en route to the tumour, second, IMX-110’s negative charge allows it to be pulled into the tumour like a magnet and third, IMX-110 induces 1,200% more cancer cell apoptosis (or cell death) than conventional therapies (see Exhibit 5).

Clinical data to date have highlighted this, with IMX-110’s TSTx demonstrating favourable safety and early signs of efficacy profiles over free dosage forms of conventional chemotherapy agents.

We believe IMX-110’s poly-kinase inhibitor PCC can be related to curcumin in the literature. Curcumin has been shown to inhibit various resistance-related pathways in cancer cells as a multikinase inhibitor. However, its clinical use in oncology has been restricted due to its poor physicochemical properties such as light sensitivity and low solubility in water. We note that curcumin has shown signs of efficacy in combination with chemotherapy in a Phase IIa metastatic cancer study in the UK. Patients treated with a combination of FOLFOX chemotherapy and curcumin recorded a median overall survival of 502 days versus 200 days for FOLFOX alone. While this demonstrates proof of concept efficacy, we note that such studies have not been widely repeated.

IMX-110’s apoptosis inducer PEG-PE doxorubicin complex can be related to doxorubicin in the literature. Doxorubicin is believed to target cancer cells through several different mechanisms: it can disrupt the structure of DNA (intercalation), inhibit topoisomerase II (a protein essential to DNA replication and cellular mitosis) and cause direct oxidative damage to DNA. However, as mentioned, doxorubicin’s use is limited by potentially severe off-target side effects (including cardiotoxicity) and pre-existing or acquired tumour resistance.

IMX-110’s dual action mechanism has potential to increase the overall cytotoxicity of IMX-110 (as shown by Immix, where IMX-110 produced a 1,200% increase in apoptosis versus conventional therapies in a preclinical cancer model). When released into the target cells, doxorubicin causes DNA damage, resulting in the upregulation of p53 and triggering of apoptosis (cell death). Curcumin interrupts the (PI3K)/Akt signalling pathway, a major survival pathway in cancer cells. The inhibition of NF-kB by curcumin results in downregulation of the (PI3K)/Akt pathway, which is another trigger that leads to cellular apoptosis (see Exhibit 6).

Immix Biopharma’s ongoing Phase Ib trial of IMX-110 as a monotherapy is currently being conducted in Australia and the United States, and to date has treated 14 patients (Phase Ib estimated full recruitment n=30). This is an open-label, dose escalation (3+3) study designed to assess the safety and tolerability of IMX-110 as a monotherapy in patients with STS and non-sarcoma advanced solid tumours. Out of 14 patients, eight were evaluable at the time of analysis, with four patients harbouring STS. The six non-evaluable patients did not complete any tumour measurements after treatment with IMX-110, independent of safety. All patients had undergone at least three lines of previous therapy including chemotherapy and immunotherapy. Preliminary data from the STS patient cohort (n = 4), the indication of focus in the upcoming Phase IIa portion of the study, are shown in Exhibit 7.

Of note, IMX-110 reported 100% disease control (stable disease after two months) in four STS patients after two months and no dose interruptions of drug-related SAEs. This translated into a positive impact on progression-free survival (PFS), which was improved or maintained versus reported competitor data. Interestingly, one patient, who had been heavily pre-treated (13 lines), recorded a six-month PFS again with no safety concerns. Management is particularly encouraged by this result as, presumably, such a patient would have developed significant resistance to treatment and/or would have experienced serious decline due to 13 prior lines of treatment. Altogether, IMX-110 displayed improved PFS and safety over first-line treatment (doxorubicin). Additionally, IMX-110 was found to demonstrate broad activity over a range of STS subtypes and, to date, all patients enrolled in the trial have completed their planned treatment cycles without reporting safety concerns. In our view, the overall response rate (ORR) is not a clinically relevant metric to assess the efficacy of IMX-110 against as historical doxorubicin ORR rates have remained at 0%. Of greater importance, we believe, are disease control (stable disease) and median progression-free-survival data points, the results of which are potentially significant compared to doxorubicin alone (based on historical doxorubicin data as shown in Exhibit 6).

While we recognise that this preliminary data in STS represents a small patient sample, collectively, we see the improved efficacy and safety profile demonstrated by IMX-110 over existing SoCs as a positive result. We believe the broad application across STS subtypes is also encouraging and may provide further diversification for IMX-110 in the STS treatment market. The Phase IIa expansion of this study into first-line STS, intends to recruit an additional 30 patients (hence the Phase Ib and Phase IIa portions of the study plan to enrol 30 patients each, for total enrolment of c 60 across both portions) with the first expected to be dosed in Q422. Rolling interim data readouts are expected in H123. We anticipate top-line results to be announced at end-FY24. These results, in our view, will be crucial in establishing IMX-110’s clinical utility, not only in STS but also potentially in other monotherapy and combination indications.

The company expects Q422 will see the commencement of a Phase Ib trial investigating the use of the IMX-110 in combination with tislelizumab. The single-arm, dose-escalation (3+3) study aims to assess the safety and tolerability of the combination in patients (estimated n=30) with advanced solid tumours. The trial will determine the maximum tolerated dose and recommended Phase II dose for evaluation in the Phase IIa study. Management’s intention is to provide rolling data readouts throughout FY23 and FY24. In our opinion, the initiation of an ICI combination study is a positive step in the clinical development of IMX-110, with multi-drug oncology treatment regimens often demonstrating synergistic interactions and improved efficacies.

In August 2021, Immix Biopharma announced it had entered into a manufacturing and supply agreement with BeiGene for the anti-PD-1 antibody tislelizumab as part of a combination study with IMX-110. Tislelizumab has so far been approved or granted conditional approval in nine cancer indications in China, including non-squamous non-small cell lung cancer (NSCLC), squamous NSCLC, classical Hodgkin’s lymphoma, hepatocellular carcinoma and urothelial carcinoma. The drug was in-licensed (for an upfront payment of US$650m, up to US$1.55bn in milestone payments plus royalties) by Novartis in February 2021, granting the company the right to develop, manufacture and commercialise the anti-PD-1 outside of China. However, tislelizumab’s success outside of China has been limited, with Novartis recently scrapping a US approval application for its use in NSCLC. Considering this, we believe that any differentiation in safety and/or efficacy that the tislelizumab/IMX-110 combo can demonstrate versus tislelizumab monotherapy could be valuable for Novartis and may open potential licensing deal negotiations. Establishing development partnerships for drug combination trials can often be lengthy and complex, so this collaboration, in our view, could give Immix a significant strategic advantage with the potential to expand the IMX-110 development programme to further indications.

In Q122 Immix Biopharma announced preclinical data that provided an encouraging clinical rationale for the planned combination trial. The mouse model data saw an improvement in median survival by c 50% in mice treated with IMX-110 in combination with an anti-PD-1 inhibitor (ICI) compared to those treated with a four-drug combination therapy, which included two ICIs, Exhibit 8. While we see this data as encouraging, we note that preclinical results are not necessarily a reliable indicator of clinical utility.

While IMX-110 is the primary focus of Immix Biopharma’s portfolio, the company is also developing two other assets that are currently in preclinical studies. IMX-111 and IMX-120 both utilise the same TSTx technology platform as IMX-110, with modified targeting components. IMX-111 and IMX-120 build on IMX-110 with the inclusion of a GLUT1 targeting antibody and are being assessed for the treatment of colorectal cancer and inflammatory bowel disease, respectively. Preclinical studies are expected to be completed by the end of 2022, with the intention of filing investigational new drug applications to the FDA in H223.

Immix Biopharma is subject to the regular risks associated with drug research and development. As a pureplay biotech, the company will be affected by development delays or failures, regulatory risks, competitor successes and financing risks. The largest development sensitivities relate to the company’s lead clinical asset, IMX-110. The most prominent near-term risk would be failure to demonstrate clinical proof-of-concept in the upcoming Phase IIa portion of the IMX-110 STS monotherapy trial. Early clinical data from IMX-110’s ongoing Phase Ib study have been encouraging; however, they only represent a small STS patient cohort, which does not ensure clinical success. This low percentage of evaluable patients compared to the total treated makes interpretation of these results challenging. As a drug developer, Immix Biopharma is a highly cash consumptive business and may need to raise a higher amount of capital to fund the clinical development of its assets than our forecasts currently assume. While our model accounts for financing(s) as long-term debt, the company may need to issue equity instead, at pricing that may not be favourable for current shareholders and could lead to significant dilution. We believe that identification of a partner will be key to ensuring the clinical success of IMX-110 and funding development through capital-intensive clinical trials. Any challenges in securing a partner could postpone product development and/or adversely affect the economics of a potential licensing transaction.

We value Immix Biopharma at US$56.7m or US$4.1 per share. Our valuation is based on a risk-adjusted NPV calculation for IMX-110 in STS (rNPV US$26.9m or US$1.9 per share) and solid tumour indications (rNPV US$11.4m or US$0.8 per share) and incorporates a net cash position of US$18.4m at end-June 2022. In our valuation we apply a discount rate of 12.5% and assume a full licencing deal for IMX-110 is found in mid-2025, after results from the combination and monotherapy studies are reported in late-2024. A breakdown of our valuation assumptions can be found in Exhibit 9.

Over 2022 and 2023, the two market leading treatments for STS (Yondelis and Votrient) will lose patent protection in the United States, which in our view, could create significant competition to IMX-110, if approved, from generic market entrants. In addition, the STS development pipeline is busy, with products like Adaptimmune’s Afami-cel, Karyopharm’s Xpovio and TRACON Pharmaceutical’s envafolimab all estimated for potential approval in 2023 (as cited by EvaluatePharma). However, given the clear unmet medical need in STS, we assume a peak penetration for IMX-110 in STS of 20% in both the US and EU5. We assume IMX-110 is approved in STS by the FDA in early-2028, and estimate combined peak sales in the US and EU5 of US$403.6m are reached in 2033. Our estimated price of US$80,000 per patient per year is comparable to the 2021 per patient cost of Yondelis in 2021 (US$70k, EvaluatePharma).

For the IMX-110 in solid tumours programme (Phase Ib to start in Q422), we have assumed the company will subsequently look to focus on one of the larger solid tumour indications (where unmet medical needs still exist) once this programme enters Phase II trials. Additionally, we have assumed an indication where PD-(L)1 therapies are commonly used and have therefore modelled our patient population using NSCLC as a proxy indication. We will revisit these assumptions as data from the trial is made available in throughout 2023 and 2024. A breakdown of our risk-adjusted NPV can be found in Exhibit 10.

According to our model, 47% of value is generated from IMX-110 in STS, 20% from IMX-110 in combination with tislelizumab in solid tumours and 33% from the company’s cash position at 30 June 2022. Our valuation assumes a licensing deal is signed for IMX-110 in all indications in FY25, assuming positive results from the Phase IIb trial in STS and Phase Ib tislelizumab combination trial at end-2024. Considering the company’s collaboration with BeiGene, we believe this is a reasonable assumption. Based on our assessment of past licensing deals for Phase I and II assets indicated for STS, we have assumed a total deal value of US$210m, comprising a US$30m upfront payment and US$180m in sales, development and regulatory milestones. We also assume 15% royalties on net sales. Owing to the respective stages of development, we apply a probability of success of 15% to IMX-110 monotherapy in STS and 10% in solid tumour indications.

As a pureplay biotechnology company focused on research and development, Immix Biopharma does not record any revenues. In FY21 the company reported an operating loss of US$1.35m, consisting of US$0.13m in R&D expenses and US$1.23m in general and administrative expenses. The large increase in G&A costs from a year prior (FY20: US$0.21m) was due to costs associated with the company’s successful listing on the Nasdaq in December 2021. The reported loss before tax in FY21 was US$24.38m, which was substantially influenced by a reduction in the fair value of derivative liabilities held by the company of US$22.76m. In total, the company reported a net cash outflow from operating activities of US$1.59m in FY21 rising to US$2.04m in H122.In H122, the company reported an increased operating loss of US$2.89m (R&D: US$1.28m, G&A: US$1.65m) as the clinical development of IMX-110 ramped up over the period.

As we expect a ramp up of clinical activities from Q422, we estimate R&D expenses for FY22 to be US$3.52m, with roughly US$2.5m being allocated to the development of IMX-110 and c US$1m for additional R&D costs associated with preclinical activities. As we expect the Phase Ib (combination) and IIa (monotherapy) trials will be running simultaneously over the following years, we anticipate a substantial increase in R&D expenditure to US$6.0m in FY23 with a roughly similar expense recorded in FY24. We base our R&D costs on estimated expenses incurred by the company in previous clinical trials and management’s communicated budget of c US$11m for both IMX-110 trials. We expect general and administrative expenses will grow to US$2.70m in FY22, corresponding to the increased clinical preparations and commencement of trials, with a more modest growth of 2% in FY23 and beyond as the IMX-110 programme continues. Considering our estimated R&D and general and administrative costs, we estimate operating losses for Immix Biopharma in FY22 and FY23 of US$6.22m and US$8.77m respectively. This translates into a net cash outflow from operating activities of US$5.41m in FY22 and US$8.79m in FY23.

The company floated on the Nasdaq in December 2021, raising net proceeds of US$18.65m (4.2m shares of common stock at US$5.00 per share for US$21m in gross proceeds), and an additional US$2.91m in net proceeds in January 2022 from the exercise of the underwriter’s over-allotment option in connection with the IPO (630k shares of common stock). Accordingly, the company had a cash position of US$18.40m at end-H122 and no debt. Immix reported a cash burn rate of US$2.04m over H122. Considering our forecast increase in operating expenses, we estimate the company’s operations are funded to Q424. We expect top-line results from the Phase Ib combination trial and Phase IIa monotherapy trial for IMX-110 will be reported in Q424, and as such, the company will need to raise additional capital in FY2024 of c US$10m, by our estimates. We anticipate this funding could support operations past top-line data readouts in Q424 until a licensing deal is found, which we estimate to be in mid-2025. If a licensing deal in line with our estimates can be realised, we believe this could bring the company to operating sustainability from mid-2025. We note that should clinical timelines be delayed, or the company begins new clinical development programmes, our cash requirement forecasts may need to be increased.