Is the Long Road to Royalties Over for ImmunoGen?


Two years later, and ImmunoGen (NAS: IMGN) is finally on the last stretch toward bringing in royalty revenue from Roche's (NASDAQOTH: RHHBY.PK) trastuzumab emtansine.

It's been a long wait since the Food and Drug Administration issued a refuse-to-file letter for the drug that ImmunoGen helped develop. Ttrastuzumab emtansine is Herceptin -- that's the trastuzumab part --linked to toxic payload emtansine. The antibody conjugate technology was ImmunoGen's contribution.

If the FDA had accepted the marketing application and approved the drug, ImmunoGen would have gotten royalties over the past two years. But in the big scheme of things, those two years don't make too much difference. The drug would have been given an accelerated approval based on the phase 2 data and would probably have been used as a treatment of last resort.

Now Roche is submitting phase 3 data for trastuzumab emtansine, which should allow the drug to gain full approval. The drug should get a faster start now that Roche has data demonstrating a significant improvement in overall survival compared to patients who got GlaxoSmithKline's (NYS: GSK) Tykerb plus Roche's Xeloda, the current second-line treatment.

The drug will be used as a secondary treatment, so sales -- and thus royalties due to ImmunoGen -- will still be somewhat minimal. For ImmunoGen to get substantial revenue from trastuzumab emtansine, the drug needs to move into the first like setting. Roche currently has the drug in multiple clinical trials to expand its use, but it'll be years before trastuzumab emtansine reaches sales levels comparable to Herceptin.

What I like about ImmunoGen's platform technology is that it isn't limited to just one drug. Trastuzumab emtansine is the furthest along, so it gets the most attention, but ImmunoGen also has deals with Sanofi (NYS: SNY) , Bayer, Biotest, and Amgen (NAS: AMGN) to develop antibodies with toxic payloads. ImmunoGen also has three drugs in the clinic that it's developing on its own.

I'm not the only one who's noticed, and you'll have to pay up for that potential. The company has a market cap over $1 billion, despite not having any drugs on the market. If you're going to buy ImmunoGen here, you should do it for the long term.

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