IMGN - ImmunoGen: Making A Successful Comeback

2023-05-12 11:20:28 ET

Summary

• ImmunoGen, Inc. lead drug (Elahere) recently gained accelerated approval to treat patients afflicted by platinum-resistant ovarian cancers with the high FRA expression.
• The Q1 earnings report showed that the blockbuster prospect (Elahere) is gaining stronger traction than what the market anticipated.
• ImmunoGen posted strongly positive MIRASOL data in May, as I forecasted.

Risk comes from not knowing what you're doing. - Warren Buffett.

Author's Note : This is an abbreviated version of an article originally published in advance on May 11, inside Integrated BioSci Investing for our members.

In biotech investing, it's a thrilling time when there is a BIG data release for the lead franchise. If positive, the stock usually but not always enjoys a pop. Nevertheless, you can expect with near certainty that the stock would crash if the data is negative. As such, it's crucial that you conduct your forecasting for your clinical-stage and/or early-product-stage bio stocks. Doing so allows you to enjoy substantial profits while avoiding catastrophic falls.

On that note, ImmunoGen, Inc. ( IMGN ) recently had a huge Phase 3 ((MIRASOL)) trial data release this May. The results turned out strongly positive, as I forecasted in our prior research and in our Open-Mic Webinar. As such, the next destination for Elahere is full approval. In this research, I'll feature a fundamental analysis of ImmunoGen and share with you my expectations for this intriguing equity.

Figure 1: ImmunoGen chart.

About The Company

As usual, I'll present a brief corporate overview for new investors. If you are familiar with the firm, I recommend that you skip to the subsequent section. Operating out of Waltham, Massachusetts, ImmunoGen has dedicated its efforts to the innovation and commercialization of antibody-drug conjugate ("ADC") to fulfill the unmet needs in various cancer indications. I noted in the prior article :

... The firm is brewing an intriguing pipeline of "smart medicines." Among various molecules, you can see that mirvetuximab (Elahere) is the crown jewel. Accordingly, ImmunoGen is investigating its use as monotherapy (i.e., stand-alone drug) and in combo with other medicines for various cancers. That aside, ImmunoGen is advancing other promising molecules such as IMGN-632 (i.e., pivekimab), IMGC-9326, and IMGN-151 for both solid tumors and blood cancers.

Figure 2: Therapeutic pipeline.

Elahere Commercialization Progress

As you know, Elahere gained accelerated approval to treat patients afflicted by platinum-resistant ovarian cancer with high FRA expression back in November last year. As such, you should check up on its progress. After all, sale progress is crucial to this investment thesis.

As you can appreciate, Elahere is the first and only ADC approved for ovarian cancer treatment. Therefore, it marks a victorious point in our fight against ovarian cancers. Moreover, the said regulatory win marked a transitional point in ImmunoGen's history, as this drug is organically developed in-house. Furthermore, it signifies that this management can execute.

Figure 3: Elahere profile.

As you can appreciate, ImmunoGen reported that Elahere generated $29.5M in sales in the recent earning report. That is remarkable, considering that this is the early phase of an in-house drug launch. As you know, the company also conducted a genetic profile of the tumor. Viewing the figure below, you can see that ImmunoGen tested 5.4K patients through April 2. The more these tests are being done, the higher the upcoming sales growth.

Figure 4: Elahere launch progress.

Beyond the U.S. market, you can appreciate that ImmunoGen is sending Elahere to other areas of the world. Specifically, the company is seeking approval and penetration into the EU/UK markets. Along with its partner (Huadong Medicine), ImmunoGen is poised to launch Elahere to the vast China market. As approvals roll in for additional areas as mentioned, you can expect leaping sales growth to come.

Figure 5: Additional markets penetration.

Robust MIRASOL Data Catalyst

Shifting gears, let us take a deeper dive into the recent MIRASOL data catalyst. Accordingly, the confirmatory ((MIRASOL)) trial was fully enrolled. As a high-quality trial, MIRASOL is assessing 453 patients afflicted with resistant ovarian cancers. Keep in mind, these patients had one to three prior therapies with chemo, and they are expressing high folate alpha receptors.

Figure 6: MIRASOL study set up.

Mar 3rd marked a huge turning point for ImmunoGen, as the company reported extremely robust MIRASOL outcomes. As shown below, Elahere demonstrated the 42.3% Overall Response Rate (i.e., ORR) compared to the 15.9% ORR for the patients in the chemotherapy arm. Importantly, 12 patients on Elahere enjoyed the Complete Response (i.e., CR) versus none for the same comparison.

Importantly, Elahere's treatment led to a 33% reduction in the risk of death. The Overall Survival (i.e., OS) for patients in the Elahere arm also registered at 16.46 months, which is a remarkable improvement from the 12.75 months for the comparator. The drug was also well tolerated. Highly enthused by the results, the CMO (Dr. Anna Berkenblit) remarked,

We are elated with the positive top-line results from MIRASOL. We believe the impressive efficacy data and consistent safety data reinforce Elahere's benefit for patients with platinum-resistant ovarian cancer. Importantly, Elahere is the first drug to show an overall survival benefit in this patient population. These results are remarkable and we extend our appreciation to all of the patients and physicians who participated in MIRASOL. We look forward to presenting full data from the trial at a medical meeting later this year.

Figure 7: MIRASOL results.

Riding the strong/unequivocal data, ImmunoGen is eager to submit a Market Authorization Application (i.e., MAA) in Europe in H2 this year. Around the same time, the company would file the Biologics License Application (i.e., BLA) with the FDA for full approval. Commenting on the recent clinical development, the President and CEO (Mark Enyedy) noted,

These MIRASOL data show Elahere is a first-in-class, biomarker-driven ADC for the treatment of FR?-positive platinum-resistant ovarian cancer and mark a significant milestone for patients and our organization. We believe these data will provide the foundation for pursuing a marketing authorization in Europe and elsewhere, and seeking full approval in the US, support our goal of delivering Elahere to FR?-positive patients worldwide, and reinforce our conviction in our clinical development program to move this therapy into broader populations, including platinum-sensitive disease. Elahere’s differentiated safety and efficacy data provides further validation of our leading ADC platform and broad clinical pipeline of novel ADCs for solid tumors and hematologic malignancies.

Label Expansions

Now, ImmunoGen is expanding the Elahere label into earlier-line treatments either alone (i.e., monotherapy) or in combination with chemotherapies for platinum-sensitive ovarian cancers. You can bet that drugs being prescribed in earlier lines are the ones to generate blockbuster sales. Hence, it's prudent for the management to advance Elahere into earlier-line options.

Figure 8: Future label expansions.

Growing Market

From the figure below, you can see that the U.S., ovarian cancer market is sized at $2.1B. Growing at 25% CAGR, this market is expected to reach $6.5B in the next five years. Likewise, the global market is also growing at a similar rate to hit $10.5B by 2028.

Figure 9: Growing ovarian cancer markets.

As the current guidelines expand for Elahere to patients afflicted by platinum-sensitive ovarian cancer, you can anticipate that this market will double in the future. Ergo, this industry tailwind would translate into growing sales for Elahere and value creation for shareholders. Most importantly, patients would have another great option in our fight against deadly cancers.

Figure 10: Increasing patient base.

Financial Assessment

Just as you would get an annual physical for your well-being, it's important to check the financial health of your stock. For instance, your health is affected by "blood flow" as your stock's viability is dependent on the "cash flow." With that in mind, I'll analyze the 1Q2023 earnings report for the period that ended on March 31.

As follows, ImmunoGen procured $49.9M in total revenues (of which $29.3M is from Elahere product sales) compared to none for the same period a year prior. The remaining revenue came from licensing fees related to the Vertex collaboration.

That aside, the research & development (R&D) for the respective periods registered at $51.6M and $44.2M. I viewed the 16.7% R&D increase positively because the money invested today can turn into blockbuster profits. After all, you have to plant a tree to enjoy its fruits.

Additionally, there were $41.01 ($0.16 per share) net loss compared to $24.01 ($0.10 per share) decline for the same comparison. The widening bottom line depreciation made sense because the company is investing more capital into R&D and commercialization ramps up.

Figure 11: Key financial metrics.

About the balance sheet , there were $201.2M in cash and equivalents. Earlier this month, ImmunoGen entered into a term loan with Pharmakon for $175M, of which it drew the initial $75M tranche. On top of the recent $373.8M public offering recently raised, the cash position is boosted to $575.0M. Against the $92.2M quarterly OpEx and plus the $29.5M quarterly revenues, there should be adequate capital to fund operations into 2Q2025.

Potential Risks

Since investment research is an imperfect science, there are always risks associated with your stock, regardless of its fundamental strengths. More importantly, the risks are "growth-cycle dependent." At this point in its life cycle, the main concern for ImmunoGen is whether Elahere would gain full approval for ovarian cancer. The other risk is if other clinical development to send Elahere into earlier line treatment for platinum-sensitive cancer would bear fruits. As a young company, ImmunoGen might grow too aggressively and thereby runs into a potential cash flow constraint.

Final Remarks

In all, I maintain my buy recommendation of ImmunoGen, Inc. with a 4.5/5 stars rating. Previously a turnaround stock, ImmunoGen has come a long way with the accelerated Elahere approval. The recent robust MIRASOL data significantly boosted the drug's chance of gaining full approval. The early launch is showing signs of success. Nevertheless, you can expect the most aggressive sales growth in the future with label expansions and advancement into earlier line treatment. That aside, the other molecule pivekimab can deliver surprising data. Overall, ImmunoGen, Inc. stock will likely continue to reward you in the long run.

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