Biotech Portfolio Updates- Buying More Immunogen

Investing, particularly in biotech, comes with plenty of risks and uncertainties. These uncertainties are usually results of clinical trials, which are very unpredictable and unfortunately do not end up well in most cases.  Once in a while, a company and its stock price diverge in a way that substantially decreases the risk in a particular company without increasing the stock price. We believe what happened yesterday with Immunogen (IMGN) is a classic case of this phenomenon.

Immunogen, similarly to all its peers in the field of drug development for cancer is a high risk investment, and  will surely have more bad news than good news to tell its investors over  the years, simply because in drug development, successes are substantially outnumbered by failures. Yesterday should have been one of the happiest days for Immunogen’s shareholders, as a great uncertainty that has been hovering over the company was resolved, and turned into a great achievement. Genentech’s (DNA) T-DM1 is by far the most important drug for Immunogen currently, for reasons explained here, here and here. Two days ago, Genentech publically stated that by early 2009, T-DM1 will be in two registration trials for indications with blockbuster potential. Of course, there is no way of knowing the final outcomes of either study, but it is important to realize that Genentech based its decision based on much more than the data that was published  from several T-DM1 trials. Consequently, Genentech statement turned Immunogen into a company with a more attractive risk/reward ratio, simply because the risk component is substantially lower today than prior to the announcement.Regardless of the recent news, Immunogen is expected to have additional good news on several fronts in the coming 6-9 months.

 In the coming 9 months, we expect the company to announce whether IMGN242 managed to demonstrate an objective response in a phase II trial in gastric cancer patients. This announcement seems like a classic win/win   situation. Investors have already given up on this agent, which showed disappointing results in the current as well as in its earlier version. The company already stated it would discontinue development of IMGN242 if no responses are shown among the first cohort of 23 patients. This would free up resources and enable the company to focus on other in-house products, so ironically, even a negative announcement would be perceived as a good things by investors, who want to leave that story behind them. We are not expecting great things from this trial, but we do note that a fairly impressive response in one of the first six patients enrolled to the study was reported (bottom right of the poster) at ASCO. Thus, there is still a chance for an objective response.

Also in the coming 9 months, we expect Immunogen to announce several licensing deals with new and present partners. First and foremost, based on management remarks and market trends, we expect the company to announce one broad technology licensing collaboration with a pharmaceutical company. The deal could be either very general such as the 5 year collaboration with Sanofi-Aventis. It can also be more specific, similarly to the collaboration with Genentech which includes specific targets. 

Speaking of Sanofi and Genentech, we expect additional candidates from these collaborations to enter the clinic in the coming 9 months. In a recent investor conference, Immunogen’s CEO revealed that  they had recently met with Genentech and that Genentech is “making progress” with antibody-drug conjugates (ADC) against three additional targets. It will be safe to expect that one of these agents will enter the clinic in the foreseeable future. Sanofi will most likely advance two additional products into the clinic, SAR566658 and SAR650984. SAR566658 is an ADC that targets DS6, a target that can be found on a plethora of solid tumors. SAR650984 is a naked antibody that will be evaluated for the treatment of blood cancers.  

With respect to actual data publication, Immunogen will publish new data on IMGN901, which is currently in a phase I trial in multiple myeloma. Antibodies for the treatment of multiple myeloma are currently one of the hottest topics in hematology, as can be echoed by the very high activity in the field that attracted Genentech, Bristol-Myers Squibb and Biogen-IDEC, just to name a few.  Data from this study will be published at the ASH annual meeting this December. We still remain cautious about the activity of IMGN901 as a single agent, after last year’s disappointing results, nevertheless, Immunogen’s CEO alluded to this data by stating that “…the data look good, we continue to see patients derive clinical benefit…“, so there could be a positive surprise there.

Shortly afterwards, at the  Annual San Antonio Breast Cancer Symposium, Genentech is expected to give an update on an ongoing phase II trial of T-DM1 in 2nd and 3rd line metastatic breast cancer, which should be positive given Genentech’s recent decision.  Early next year, Genentech is expected to dose the first patient in the phase III pivotal trial, which will trigger a potentially double digit milestone payment, will announce the receipt of a substantial milestone payment to Immunogen.It is important to note that despite all these positive catalysts down the road, there are likely to be disappointing news as well, as is always the case with drug development. However, at this point of time, with two potentially registration studies underway, Immunogen seems to be cheaper than ever, which is why we decided to increase our holding in the company.

We also added a new company, Santarus (SNTS), on which we hope to elaborate in the future.

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10 thoughts on “Biotech Portfolio Updates- Buying More Immunogen

  1. ohad.. dna moving forward was a poorly kept secret.. announcements by dna that either of the two current phase 2 trials could be registrational was the first tip-off to investors and wall street, and that was announced in the spring of 2008.

    Wall street is way behind the curve on IMGN.. you are correct. We also know that tras-dm1 works very well, and while the actual data has not been released in this subset of patients.. dna did announce that 42% of the patients studied in the first phase 2 trial had already failed a tykerb/xeloda regimen. Giving credence to dna moving forward very quickly against that patient population with both a pivotal phase 2 and pivotal phase 3 trial for 3rd and 2nd line therapy. I would expect the data that DNA presents at the SABC in december 2008, though incomplete will blow away scientists and investors and the stimulant to drive the stock price back to the 5-7 range.. or a 50-100 % return over the next 3-6 months.

    druggie

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  2. druggie
    I agree that most people who were familiar with the story expected this, but Genentech’s formal announcement combined with a nice milestone payment should have an impact imo.

    I don’t know if the data at SABC will “blow away scientists and investors”, but I am hearing good things about the data.

    ohad

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  3. Great call on IMGN.

    i added a nice chunk at 3.6 $ after your article, and am now up 25% in just 2 weeks. Where do you see the stock going in the coming month or two?
    I plan to hold a my core position anyway, I am just referring to the extra stocks I have.
    thank you!

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  4. Thanks ihope2,

    That’s a very tough question that in most cases shouldn’t be a factor in biotech companies like IMGN. I have no idea what will happen with the stock, but as you are well aware, it is a highly volatile stock, so it all depends on your risk tolerance and for what % of your portfolio IMGN accounts.

    In terms of meaningful data, Nothing is due till december, when data for T-DM1 and IMGN901 will be released. I expect the prior to be pretty good and the latter to be ok but not explosive.
    Unfotunately, data for SAR3419 ( the Sanofi CD19 ADC) will be presented only next year, and the AVE9633 was discotinued, so no new data from Sanofi this year, but potential INDs for SAR566658 and SAR650984.

    hope this helps,
    Ohad

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