Amgen's Seal of Approval Boosts Immunomedics - TheStreet

Immunomedics

(IMMU) - Get Report

Monday won a licensing agreement with

Amgen

(AMGN) - Get Report

, boosting both stocks and quieting investors' worries about Immunomedics following a series of regulatory probes.

Amgen agreed to license Immunomedics' top cancer drug in development, a treatment for non-Hodgkin's lyphoma called Lymphocide that some analysts say could be a formidable competitor to Rituxan, a similar treatment from

Genentech

( DNA) and

Idec Pharmaceuticals

( IDPH). Thousand Oaks, Calif.-based Amgen will pay Immunomedics $18 million in upfront licensing fees and up to an additional $65 million if the drug hits certain development milestones. Immunomedics will get further payments based on sales should the drug reach the market and achieve sales goals.

Analysts say the deal validates Immunomedics' technology and drug development expertise. The company and an affiliated cancer treatment center called the

Garden State Cancer Center

have received scrutiny from the

Food and Drug Administration

and the

Justice Department

over allegations related to faulty drug testing and use of

National Cancer Institute

treatment grants. Calls to the company to determine whether those investigations are continuing weren't returned.

Amgen said the version of the drug it licensed was never tested at Garden State, although the center had tested an earlier, radioactive version of the drug. Testing of all drugs at Garden State was suspended earlier this year after an FDA investigation. A Garden State spokesman declined to comment on whether testing had resumed at the center.

"Overall, it's a major validation and a great move," says Sushant Kumar, analyst with

Mehta Partners

, a New York biotech research firm that rates Immunomedics a buy and does no advising for the company. Kumar said Lymphocide "has the makings of a drug as good as if not better than Rituxan," a drug that analysts say is on the road toward $1 billion in sales.

Immunomedics shares rose $1.87, or 9%, to $22.37, while Amgen shares traded up $5.31, or 9%, to $65.25 in a rising biotech market. The

Nasdaq

biotech index rose 3% to 1119.06.

Investors had previously worried that problems related to the Garden State, which was founded and managed by David Goldenberg, the founder and CEO of Immunomedics, could have affected its ability to license Lymphocide. But those concerns may have been misplaced. Amgen is taking over all development of the drug, which recently began late-stage, Phase 3 clinical trials.

"Lymphocide has never been part of the issues they had," said Jeff Richardson, an Amgen spokesman. "From this day forward, Amgen is developing the drug."

The product adds another spoke to Amgen's wheel of drugs used in cancer treatment, which include Epogen and Neupogen, both of which are used to rebuild depleted blood in cancer patients and both sell well over $1 billion a year. Amgen has been seeking new products to build out its development pipeline, and Lymphocide will be its first drug in the monoclonal antibody class of cancer fighters, like Rituxan.

"Early-phase clinical studies suggest that epratuzumab (the chemical name for Lymphocide) may provide greater ease of administration than Rituxan by having a shorter infusion time," the companies said in a statement.