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Two lethal viruses plague general investors. The euphoria virus infects investors when the market stages sustained rallies. This virus makes investors buy and buy until the balloon becomes overstretched and eventually bursts. The fear virus causes hysteria in susceptible investors when their stocks go south and rush them to sell at ridiculously low prices. The fear virus also provokes vulnerable investors to immediately dispose of their stocks at the hint of unfavorable news, whether or not the negative news is indicative of weakness in the firms’ fundamentals. Healthy, rational investors usually take advantage to accumulate the battered stocks of firms with strong fundamentals at the new bargain price that results from sell-offs by the fearful.

A Case in Point:

IMMUNOGEN (IMGN)

The recent news announcing Genentech’s (DNA) receipt of a “Refuse to File (RTF)” letter from the FDA for the accelerated approval of the Biologic License Application (BLA) for trastuzumab-DM1 (T-DM1) has caused a sell-off in Immunogen, the owner of the technology and partner on the drug with Roche. According to the FDA letter, the refusal to give the early approval was because “the trials had not yet exhausted all available drugs approved for metastatic breast cancer, regardless of HER2 status!

The question is: Is the sell-off a fair market reaction to the news? Our answer is definitely no. Nothing in the news was related to the drug, its safety, efficacy, or its breakthrough nature. The FDA did not discuss the drug’s approvability and has not rejected it. The agency’s letter constituted a refusal only of an attempt to get the drug early on the market for the hopeless category of patients with tumor recurrence. Genentech made this decision based on the results of a single-arm Phase 2 study, which showed T-DM1 shrank tumors in one-third of women with advanced HER2-positive breast cancer who had received on average seven prior medicines, including two HER2-targeted medicines. The results convinced Genentech that TDM-1 works in recurrent HER2 breast cancer that resisted its blockbuster drug Herceptin and, evidently, the other non-specific treatments.

WOW, said a physician who was hearing the news. She developed HER2 breast cancer herself and tested positive for BRCA, which means she has inherited the breast cancer gene. As a matter of fact, her 28 years old daughter tested also positive for the gene. She has not developed metastasis or any other tumor recurrence, but she is concerned. Commenting on the FDA letter explanation to its decision, the physician/patent said, “trying to figure out what the FDA meant by exhausting all available treatment choices approved for metastatic breast cancer, the question that keeps crossing my mind is: Haven’t those patients received prior Herceptin (trastuzumab), capecitabine, anthracycline, taxane and lapatinib. How much more drugs must they receive? You know what? The drugs, yes, would be exhausted when Genentech uses them all, but definitely the patients who would receive them will be exhausted too. We asked the doctor/patient whether there are existing data on these drugs that were not used in T-DM1 trials, her answer was:

Of course the data exist and have been published, yet, why do we need them? Oncologists know that most non-specific treatments have not helped most HER2 breast cancer even in its early stages, let alone their recurrences. I wonder why should we withdraw the big hope that HER2 metastatic patients hanged on since they heard about TDM-1 results – hope that has tremendously increased since these patients learned about the filing for early approval of the promising drug. Most these patients might not be around on the delayed day of the approval.

Herceptin is the first approved HER2 targeted drug. It has improved by far the bad prognosis of HER2 breast cancer. But the drug has failed to work on around 50% of the cancer recurrence following a successful initial treatment. These patients are the candidate forT-DM1, which has demonstrated efficacy on them.

Trastuzumab-DM1 (T-DM1), in global development by Roche under a collaboration agreement with ImmunoGen. It onsists of DM1 cell-killing agent attached to the HER2-binding antibody trastuzumab (Herceptin) using ImmunoGen’s linker and methods of attachment. The drug is being developed for all stages of HER2+ metastatic breast cancer (MBC). T-DM1 has demonstrated the capability of walking the extra step towards killing the recurrent resistant cancer cells that Herceptin and other drugs failed to kill. The FDA decision has not affected Genentech’s confidence in the drug and the firm will continue the EMILIA study, which compares T-DM1 to lapatinib in combination with capecitabine in people with advanced HER2-positive breast cancer whose disease has worsened after receiving initial treatment. ImmunoGen expressed disappointment that there will be a delay in the opportunity for T-DM1 to be approved for desperate patients and will continue to focus on the development of its robust and expanding pipeline as well as advancing its technology through new partnerships.

Currently:

Enrollment is on track in the Phase 3 trial (EMILIA) evaluating T-DM1 for 2nd-line use with 580-patient randomized trial that began in February 2009 and compares T-DM1 – used as a single agent – to lapatinib) plus capecitabine.

A Phase 3 trial (MARIANNE) for 1st-line trial on route.

Waiting for October to hear the interim data of the phase 2 trial evaluating T-DM1 for first line treatment. The trial has completed patient enrollment. The data will be reported at the European Society of Medical Oncology (ESMO) meeting being held Oct. 8-12, 2010 in Milan, Italy. This trial compares T-DM1, given as a single agent, to Herceptin (trastuzumab) plus Taxotere (docetaxel).

Genentech has disclosed upcoming trials to evaluate T-DM1 for early stage HER2+ breast cancer (adjuvant use) are being considered.

Data from earlier-stage phase 1 and phase 2 clinical trials have been reported and Information on these and other T-DM1 clinical trials can be found at ClinicalTrials.gov.

The firm’s pipeline comprises: T-DM1 (see above). Lorvotuzumab, for non-small-cell-lung cancer, Merkel cell and ovarian cancers, SAR3419, for non-hogkin’s lymphoma, IMGN 388, for solid tumors. BIIB015, for solid tumors. BT-062, for multiple myeloma, SAR650984, for lquid tumors, in addition to other investigational drugs in earlier stages.

Final Note:

We ask those who caused the sell-off in IMGN: Are all these activities and results worth nothing compared to the refusal to accept earlier approval of the drug? The FDA has a job to do. We too have a job to do. Let the agency do its job and let the firms discuss the decision with the agency; it is their job too. Our job, though, is to assess the value of the firm’s drug and pipeline.

We believe the T-DM1 is the best in town for HER2 breast cancer and for its recurrences. We believe that ImmunoGen’s technology is impressive and so is the firm’s product pipeline based on its technology. We like the firm and believe it is way undervalued as traded.

Disclosure: No position

Source: ImmunoGen and the Second Lethal Virus