What does a poor, suffering
shareholder do now?
Hold onto those ImmunoGen shares, especially if you believe (as you should) that T-DM1 is still very much an effective breast cancer drug. Friday's announcement from partner
was totally unexpected and a major disappointment. The setback pushes TDM-1's expected approval into early 2013 from January 2011.
The operative word is "setback," and a temporary one at that, which makes me believe that the 40% haircut given ImmunoGen's stock price Friday was overdone.
The FDA made a bad decision in issuing a refuse-to-file letter on TDM-1. Roche probably feels the same way although all the company will only say publicly that it's disappointed with FDA's ruling but will not appeal. Instead, Roche will re-file TDM-1 when an ongoing phase III study comparing TDM-1 to
Tykerb in second-line metastatic breast cancer patients is completed. Roche anticipates going back to the FDA in mid-2012.
This is similar to the strategy forced upon
back in 2007 when FDA rejected Provenge the first time around, asking the company to conduct another clinical trial before refilling the prostate cancer vaccine. Dendreon shares took a huge hit on that initial FDA setback, but patient investors were rewarded handsomely two years later when Provenge's efficacy was confirmed and the drug was approved.
Now, to be clear, ImmunoGen is no Dendreon in that ImmunoGen doesn't control TDM-1's fate nor will it receive the vast majority of the drug's economics, if approved. (Roche is in charge of TDM-1's development and only has to pay ImmunoGen an estimated 5% royalty on sales.)
But ImmunoGen, trading around $5.60 Monday, is worth less today than it was back in May 2009 when investors (not to mention Roche and ImmunoGen) weren't sure if TDM-1 actually worked in breast cancer.
Now, we know TDM-1 is effective and it seems reasonable to believe the drug will be approved, albeit later than expected. The steep drop in ImmunoGen's stock price Friday is totally understandable, but instead of running away, clear-headed investors with the freedom to be patient should see an opportunity to buy ImmunoGen at an attractive price.
What's ImmunoGen worth today? A reasonable guess is probably in the range of $7 a share, especially since the company has $110 million in cash on hand and a moderate burn rate. That means ImmunoGen won't be desperate to raise money in order to ride out the two-year TDM-1 approval delay.
Biotech catalyst traders may not be interested in ImmunoGen now that FDA approval of TDM-1 is no longer a January 2011 event, but news flow on the drug isn't frozen. In early October, Roche will be presenting interim response rate data from a randomized, controlled phase II study comparing TDM-1 to Herceptin and Taxotere in previously untreated, metastatic breast cancer patients.
The front-line setting in metastatic breast cancer is where TDM-1 could become a blockbuster drug, perhaps even supplanting Roche's current blockbuster Herceptin. The October TDM-1 data presentation at a European cancer research conference, while preliminary, will give investors an early peek at the drug's ultimate potential and may help soothe some of the pain inflicted upon ImmunoGen shareholders Friday.
--Written by Adam Feuerstein in Boston.
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Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;
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