Immunogen, Exelixis: Right Deals at the Right Time

Includes: EXEL, IMGN
by: Ohad Hammer

Yesterday, both Immunogen (NASDAQ:IMGN) and Exelixis (NASDAQ:EXEL) announced two important partnership deals. As with any deal, both companies enjoy an injection of non-dilutive funds as well as a vote of confidence for the companies’ technologies. This time, however, it seems the deals, which could not have come in a better time, represent much more than that.

Immunogen announced a broad licensing deal with Novartis (NYSE:NVS) which provides the pharma giant with rights to use Immunogen’s antibody drug conjugate (ADC) technology for an undisclosed number of targets. The numbers demonstrate the huge appreciation in the value of Immunogen’s technology compared to several years ago. The deal includes an upfront payment of $45M as well as $200M in milestone payments for every program Novartis chooses to develop. For the sake of comparison, current agreements with Genentech and Sanofi Aventis (NYSE:SNY) entail milestone payments of in the $20-40 million range.

On top of being one of the world’s largest pharmaceutical companies, Novartis is establishing itself as an antibody powerhouse on the heels of its huge collaboration with Morphosys. The deal is significant for Immunogen not only because of the financial terms but also because it ends a two year drought. During those two years, Seattle Genetics (NASDAQ:SGEN) announced multiple collaborations, which led many to conclude that the industry is leaning more towards Seattle Genetics’ ADC technology. Both Seattle Genetics’ and Immunogen’s technologies are now well validated following SGN-35’s and T-DM1’s stellar results in Hodgkin Lymphoma and breast cancer, respectively.

Yesterday’s announcement is coming on the heels of data from the long anticipated trial for T-DM1 in 1st line breast cancer patients. Results were indeed “stunning”, as touted by Roche’s CEO last week. Not only was T-DM1 more effective than chemotherapy and Herceptin combined in terms of tumor shrinkage, it was also much safer and well tolerated. This is the first time T-DM1 is compared directly to an approved regimen and investors can hope the agent performs as well in an ongoing phase III trial vs. another chemo regimen in 2nd line patients.

It is important to note that the ESMO results are still early with more mature data expected next year. It will be interesting to see if there is a difference also in progression-free survival, which is the primary endpoint of an ongoing phase III study in 1st line patients. In other words, in order to get approved for 1st line breast cancer, T-DM1 will have to demonstrate at least comparable PFS.

Although it is too early to tell, it looks like T-DM1 stands a fair chance of beating chemo+Hercetin. Thanks to its excellent safety profile, T-DM1 should have an inherent advantage: In contrast to chemo drugs that are given for a limited number of cycles due to side effects, T-DM1 can theoretically be administered chronically until progression. This is exactly the concept behind antibody drug conjugates – potency of chemotherapy coupled with the safety profile of antibodies.

Exelixis announced a lucrative deal with BMS (NYSE:BMY), which included an upfront payment of $60M for two preclinical programs. Last June, Exelixis experienced a major setback following BMS’ decision to return rights for Exelixis’ lead agent, XL184. Although Exelixis had over 10 proprietary and partnered compounds in clinical trials, BMS’ decision was viewed as a deadly blow to the company both financially and morally. Signing a deal with BMS in particular should help the company recover its reputation and investors’ confidence in the company’s ability to execute on its plans.

The recently signed deals will take time to materialize into actual clinical programs. In the meantime, both Immunogen and Exelixis are expected to release important clinical data this year, which could have an important impact - for good or worse.

Disclosure: Author is long IMGN, EXEL SGEN