Solid pipeline makes ImmunoGen (IMGN) a good long-term investment

ImmunoGen Inc. (NASDAQ: IMGN) last week reported a profit after incurring losses in the first three quarters of last year. The surprise earnings added to the optimism of analysts, who have been bullish on the drug developer’s impressive pipeline and future prospects for some time.

The market responded positively to the strong fourth-quarter numbers and the progress the Massachusetts-based biotechnology company has achieved on the drug development front. The stock rose about 30% in the following session, making one of the biggest one-day gains in recent times. Analysts following the stock are quite bullish on its long-term prospects though they see a pull-off in the coming months when sales are expected to decline from prior-year levels. Still, the low valuation and promising pipeline make the shares an attractive bet.

Programs On Track

After accelerating the development programs and boosting the portfolio last year, despite the virus-related uncertainties, the management is all set to launch two important products next year. The major development activities scheduled for this year include completion of enrollment in the SORAY clinical trial on Mirvetuximab Soravtansine for ovarian cancer, which is expected to produce top-line data in the third quarter.

The biologics license application for Mirvetuximab Soravtansine will be submitted by year-end, which is expected to obtain accelerated approval in 2022. Also, dose-escalation in the clinical study of IMGC936, a first-in-class ADAM9-targeting antibody-drug conjugate, will be completed this year, with initial data expected in the latter part of the year or early 2022. There was a 52% growth in research and development expenses in the most recent quarter, mainly due to costs related to product launches and clinical trials. Of late, there has been an increased focus on strategic partnerships.

From ImmunoGen’s Q4 2020 earnings conference call

“So, after a transformative 2020, we entered this year with significant momentum and strong prospects for the business. With an important near-term pivotal readout for our lead program, a second pivotal program with data in 12 months to 18 months, our earlier stage portfolio accelerating and a strong cash position to carry us past our first approval, we have the right strategy, team, and resources in place to generate value in the near- and long-term as we transition to a fully integrated oncology company and bring our first two products to market in 2022.”

Sluggish Growth?

Meanwhile, there are concerns that ImmonoGen’s growth would lag the broad industry in the near future, as indicated by the bearish sales guidance. While the business is expected to pick-up momentum, growth could be slower compared to peers. In short, it is time to approach the company from a different perspective, given the near-term weakness the unfolding opportunities.

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Read management/analysts’ comments on Immunogen’s Q4 results

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For the fourth quarter, ImmunoGen reported earnings and revenues that exceeded Wall Street’s prediction. Total revenues nearly doubled to $85.8 million and surpassed the forecast. Net income was $31.4 million or $0.16 per share, significantly higher than $4.8 million or $0.03 per share reported in the fourth quarter of 2019.

Stock Movement

ImmunoGen’s stock traded down 6% in the early hours of Tuesday’s trading, after closing the previous session higher. It is up 52% since the beginning of 2021.