ImmunoGen Inc.: Good Bet For Gutsy Investors

| About: ImmunoGen, Inc. (IMGN)
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Summary

ImmunoGen's share price has dropped drastically over the last year.

ImmunoGen's cancer therapies have tremendous potential, along with great risk.

So far, ImmunoGen has produced positive results, making it a candidate for investors with guts.

ImmunoGen Inc. (NASDAQ:IMGN) has been the subject of numerous analyses lately. At the present juncture, the company's shares are trading at $1.76, down just over 1%. In December 2015, shares were trading in the $13 range. Apparently, ImmunoGen is on a black diamond ski slope, dropping rapidly.

So what's the straight scoop on ImmunoGen? First, since it's a biotech company looking for a cure for cancer, all it does is burn through cash. This is to be expected. Then in 2015, ImmunoGen was running out of money, so the company sold its interest in Roche's (OTCQX:RHHBY) Kadcyla for $194 million. It was not just a simple sale, where you get this and I get the money. It was a cash advance on future royalty payments from Roche, a J.G. Wentworth deal.

Unfortunately, Kadcyla's phase II/III clinical trials bombed. This put ImmunoGen in the position of owing the cash advance, $194 million, plus interest, for a total of $235 million. In other words, it will take eight years before ImmunoGen sees the royalty revenue stream kick back in.

In October 2016, ImmunoGen announced it was chopping its workforce by 65 people, in an effort to save money, approximately $11 million.

None of the above is encouraging. What is encouraging is ImmunoGen's potential. The company focuses on anti-body drug conjugates, ADCs. I don't pretend to understand the science behind any of what I am about to discuss, but I can see the potential. For those who do understand the science and want more specifics, I suggest you read William Myers take on it.

ImmunoGen has two ADCs in development: IMGN632 and IMGN779. ADCs have the potential to deliver super-powerful killing agents to the cells in acute myeloid leukemia, AML, without killing the patient by means of toxicity. That sounds like just what the doctor ordered. The trick is to engineer the ADC's specificity, i.e. design it to hit only the targeted cancer cells. This is what ImmunoGen is attempting to do.

ImmunoGen doesn't have all its eggs in one basket. In addition, the company is developing mirvetuximab soravtansine for use in ovarian cancer. So far, the outcomes have been positive. Phase III clinical trials will occur during 2017, with outcomes unavailable until 2018. Then there's IMGN529, a drug therapy for non-Hodgkin lymphoma. IMGN529 is in Phase II trials.

Any of the previously mentioned therapies could be combined with other therapies, which means the potential is astounding. The kicker is positive outcomes, whether they work and do so without killing the patients. And don't forget the FDA. FDA approval will make or break ImmunoGen. However, based on Phase I trials, the FDA advanced mirvetuximab soravtansine to Phase III trials, skipping Phase II. This leads me to believe the FDA likes what is has seen so far.

The potential for IMGN632, IMGN779 and mirvetuximab soravtansine is tremendous. Of course, if they bomb, the potential goes out the window.

Still, if just one produces positive results, ImmunoGen's share price would rocket. As of September 2016, the company had $196 million in cash and/or cash equivalents. According to ImmunoGen, it should end 2016 with $165 million to $170 million. Not great, but if 2017 interim outcomes are positive, the company should not have difficulty bringing partners on board.

Based on ImmunoGen's present share price and the possible potential, I suggest that ImmunoGen is an attractive proposition for investors with intestinal fortitude and the willingness to hang in over the long-term.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.