Connect Biopharma is Exploiting a Previously Hidden Asset

Connect Biopharma (CNTB) is a clinical-stage biopharmaceutical company for the treatment of inflammatory diseases. I spoke with the CEO last week and thought this stock would be of interest to MCO readers. The stock presents a high return/low risk opportunity due to the company's strategy shift, the significant unmet need that the company is targeting, encouraging early results, and sufficient cash to bankroll operations into 2027.

Strategy Shift

Connect Biopharma was founded in China in 2012 to develop its lead drug candidate, Rademikibart, for the treatment of asthma and atopic dermatitis. Phase II regulatory trials in the U.S. and China have been successfully completed. In 2024, the company brought in a new management team and redirected its efforts to developing Rademikibart for the treatment of chronic asthma and chronic COPD. The rights to Rademikibart for the treatment of asthma and atopic dermatitis in China were sold to Simcere Pharmaceutical.

Management recognized Rademikibart as an undervalued asset, as there are approved treatments for asthma and atopic dermatitis, such as Dupilumab. Still, there is a void in treating chronic asthma and chronic COPD, conditions that exacerbate asthma and COPD, resulting in hospitalization. The company’s focus is on the acute exasperation of COPD and asthma and its current Seabreeze trials address this unmet need.

Opportunity

There are about 1.6 million emergency room visits due to chronic asthma, and 1.4 million emergency room visits for chronic COPD in the U.S., with a TAM that exceeds $5 billion.

Connect Bio plans to sell the rights or establish a partner to develop Rademikibart through Phase III and commercialization, except China, upon completing Phase II of its ongoing dual clinical trials for chronic asthma and chronic COPD, expected to be completed in the first half of 2026.

Simcere Pharmaceutical, Connect Bio's Chinese partner, is pursuing regulatory clearance in China for the treatment of Atopic Dermatitis due to the large market size, expected to double in size to a TAM exceeding $1 billion by 2030. There is $110 million in milestone payments due to Connect Bio from Simcere as certain goalposts are met. Simcere will pay Connect Bio about $13 million shortly upon acceptance of its application to commence a Phase III clinical trial in China for the treatment of Atopic dermatitis.

U.S. Centric Shift

The company has almost completed its shift from a Chinese company to a U.S.-based company, moving its headquarters from China to the U.S. and changing the members of the board. Manufacturing was established in the U.S., and a new management team was brought on, led by new CEO Dr. Barry Quart. Dr. Quart's credentials include leading the development of nine drugs approved by the FDA as CEO of Heron Therapeutics and Ardea Biosciences, which he founded. He holds 18 U.S. patents for his inventions and has authored numerous publications.

SEC reporting has begun, and trading will switch from an ADR to a Nasdaq-listed stock in September.

What is Special About Rademikibart

The company is advancing Rademikibart, an anti-interleukin-4-receptor alpha (IL-4Rα), which, in English, I think, means it blocks type II inflammation that is typically found in asthma and atopic dermatitis. What makes Rademikibart a potentially groundbreaking drug is that it is quickly effective. In the words of Dr. Quart:

Unlike other biologic therapies, which typically can take weeks (and in some cases months) to achieve symptom improvement, rademikibart has demonstrated significant improvement in airway function in asthma patients within 24 hours. Moreover, this clinical effectiveness has been sustained for up to 24 weeks with an improved safety profile compared to dupilumab.

Rademikibart has demonstrated improved lung function and reduced exacerbations in its global clinical trials. Data from the ongoing Phase II clinical trials for chronic asthma and COPD is expected in the first half of 2026.

Financials

There are about 55.6 million shares outstanding. There are discrepancies in insider data for CNTB provided by different sources, but they all point to the majority of shares being held by insiders, institutions, and investment firms. The market cap is $111 million. The last reported cash is $83.9 million with debt of $940 K. The burn rate is about $35 million, so the company has sufficient funds to operate for the next year and beyond.

Risks

The stock has a low float and is therefore subject to wild price swings. There are regulatory hurdles to overcome, and there is the risk of a competitor arising as CNTB aims to be the sole solution.

Conclusion

The stock has been climbing higher as the company completes its shift to becoming U.S.-centric and getting noticed. There is a short-term catalyst for stock price appreciation as the company is about to receive a milestone payment from its Chinese partner. There is sufficient cash in the till to eliminate the risk of dilution to raise capital. The wait for data from the ongoing U.S. Phase II clinical trials is just until the first half of 2026. The same time frame for data from the Chinese Phase III trial.

Disclosure: I have a position in this stock, but we are not adding it to our MCO portfolio. I can manage many more stocks in my portfolio than I can actively write about.

We are not qualified to provide investment advice. This is for informational purposes and hopefully to encourage a dialogue.