ImmunoGen: Secondary Offers Ideal Entry Point

| About: ImmunoGen, Inc. (IMGN)


The stock price has risen by roughly 50% since my first write-up.

I provide a recap of the bullish thesis and recent events.

FORWARD-II data was encouraging and gives credence to management's decision to position mirvetuximab soravtansine as a preferred combination agent.

Strengthening of the Board of Directors and the executive team is a green flag.

Risks remain, but scooping up shares prior to upcoming catalysts later this year and in 2019 makes sense.

Shares of ImmunoGen (IMGN) have lost roughly a quarter of their value in the past three years. The stock price has increased by around 50% since my article from July of last year suggested further upside was ahead.


Figure 1: IMGN daily advanced chart (Source: Finviz)

Figure 2: IMGN 15-minute chart (Source: Finviz)

When looking at charts, clarity often comes from taking a look at distinct time frames in order to determine important technical levels to get a feel for what's going on. In the first chart (daily advanced), we can see that since the bottom was established in November the stock has been on a nice run which peaked in late March. In the second chart (15-minute), we can see the stock tried to test support at the psychologically important $10 level but won the battle this time around.


In the marketplace service ROTY (Runners of the Year), we search for stocks that are attractive across multiple time frames with potential for high percentage upside within the near to medium term.

Our monthly returns chart for the 10-stock model account shows we've hit a couple of rough patches as well as experienced solid win streaks, and I make it a point to help members learn from both.

Figure 3: Monthly performance for ROTY's 10 stock model account

Figure 4: Clinical-stage pipeline (Source: Corporate website)

In the case of ImmunoGen, keys to the original bullish thesis included the following:

  • An attractive niche for lead clinical candidate mirvetuximab soravtansine in patients with folate receptor alpha (FRα)-positive ovarian cancer, with the company estimating a potential market of 7,500 to 9,000 platinum-sensitive patients in second-line recurrent ovarian cancer and 19,000 to 24,000 platinum-resistant patients. The drug candidate was on track to hit the market by 2020 if approved as a monotherapy with combination regimens to follow (possibility of becoming the preferred agent for combining with PARP inhibitors and immuno-oncology drugs).
  • Substantial potential to be realized via expansion into other indications (non-small cell lung cancer, endometrial and triple negative breast cancer).

With the necessary financing out of the way, I believe it's time to review recent events, look toward upcoming catalysts and determine if there's an opportunity to be exploited.

Recent Developments

The company started the year by announcing that the first patient had been treated in the phase 1 study evaluating IMGN632 in patients with CD123-positive hematological malignancies, including acute myeloid leukemia and blastic plasmacytoid dendritic cell neoplasm. The trial is following a once every three week dosing schedule in the dose-finding stage, which will then be used in expansion cohorts in patients with BPDCN, AML, ALL, and other CD123-positive hematologic malignancies.

The addition of Stuart Arbuckle to the Board of Directors was a welcome green flag (served as EVP and COO since 2012 at Vertex (NASDAQ:VRTX) and as vice president and regional general manager at Amgen (NASDAQ:AMGN) prior). Flashing forward a couple months, a key hiring in the form of Blaine McKee, Ph.D. as Executive Vice President and Chief Business Officer was also received with optimism (former head of corporate development at Shire (NASDAQ:SHPG)).

In late March the company presented encouraging data from the FORWARD II cohort evaluating mirvetuximab soravtansine in combination with Merck's (MRK) anti-PD-1 asset pembrolizumab in patients with platinum-resistant epithelial ovarian cancer. Of 14 heavily-pretreated patients (received on average 4.5 lines of systemic therapy), confirmed overall response rate was 43% with median progression free survival of 5.2 months. A subset of 8 subjects with medium or high folate receptor alpha (FRα) expression levels showed overall response rate of 63% with median progression-free survival of 8.6 months. Importantly, at the full dose (6 mg/kg for mirvetuximab and 200 mg for pembrolizumab), a decent safety/tolerability profile was observed.

Based on these results the company chose to move forward with enrollment of 35 more patients (medium or high FRα expression levels) in the expansion cohort.

A successful interim analysis for the FORWARD I phase 3 study evaluating mirvetuximab soravtansine as a single-agent therapy for the treatment of platinum-resistant ovarian cancer means the next step for the program is top-line data in the first half of 2019.

Shifting back to the FORWARD II study, data from the cohort evaluating mirvetuximab in combination with Avastin (bevacizumab) was announced with a presentation to follow at ASCO. Specifically of note, in a subset of 23 patients with medium or high FRα expression levels who received up to three prior lines of therapy, ORR was 48% with median PFS of 9.9 months and duration of response of 10.6 months. In 54 patients evaluable for response ORR was 43% with median PFS of 7.8 months.

Figure 5: Spider plot of subset analysis comparing medium and high FRα-expressing patients (Source: ASCO poster)

Lastly, management decided to take advantage of strength in the stock price to extend the operational runway, closing an upsized secondary offering consisting of 13.7 million shares sold at a price point of $11 per share for gross proceeds of $150.7 million (not including underwriter option). The fact that the offering was increased from 12 million shares to 13.7 million bodes well for interest, as did the decent pricing and agents involved (J.P. Morgan, Goldman Sachs, Cowen and Company, Canaccord Genuity, H.C. Wainwright & Co).

Other Information

For the first quarter, the company reported cash and equivalents of $218.4 million and net loss of $38.6 million. Management guided for full year 2018 operation expenses of around $200 million and finishing the year with between $115 million to $120 million in cash. It had originally projected an operational runway into the fourth quarter of 2019 (not taking into account secondary offering).

As for future catalysts of note, the most material (in the near term) is likely initial data from the FORWARD II mirvetuximab plus pembrolizumab combination expansion cohort in 35 patients (expected in second half of the year).

Figure 6: Potential to treat more women with ovarian cancer in combination settings (Source: Corporate presentation)

We can also look forward to more data from the IMGN779 dose-finding trial and initial data from the IMGN632 dose-finding study (both in the first quarter). The rest of the pipeline continues to progress, with Takeda (OTCPK:TKPYY) partnered TAK-164 to enter the clinic this quarter and ImmunoGen's ADAM9 program to undergo IND-enabling activities prior to the end of the year. Keep in mind that top-line data from the FORWARD-1 pivotal trial is expected in the first half of 2019.

As for institutional investors of note, Redmile Group and ClearBridge Investments both own over 9 million shares each.

Final Thoughts

To conclude, I think the recent secondary offering has offered readers an attractive entry point prior to several catalysts later this year and the much expected pivotal readout in 2019.

Readers who have done their due diligence and are interested in the story will likely do well scooping up shares in the near term. Taking partial profits prior to pivotal data is suggested in order to manage risk appropriately.

Dilution in the near term appears to be off the table now. Disappointing data in its lead trial would be devastating to the bull thesis, while negative results in other ongoing studies would weigh on the stock as well. Clinical setbacks and competition are other factors to consider. Again, the pivotal trial readout presents investors with a high risk/high reward situation.

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