Why ImmunoGen Shares Plunged

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of biotechnology firm ImmunoGen (Nasdaq: IMGN  ) fell as much as 11% earlier in the trading session after announcing a secondary offering after the bell last night.

So what: After the market closed yesterday, ImmunoGen priced 6.25 million shares at $16, an 8% discount to its previous closing price. The goal for ImmunoGen is to raise about $100 million, although the company wasn't forthcoming about the potential uses for its cash. The offering would raise ImmunoGen's total cash to around $275 million (including the $175 million it reported at the end of its most recent quarter), with no debt, and up its shares outstanding to more than 83 million from just 43 million in 2008.

Now what: Investors appear shocked with the share offering, but there are really no surprises here. ImmunoGen has no FDA-approved drugs and, until it does, it will burn through its precious cash. ImmunoGen has been rallying since Roche (OTC: RHHBY) reported positive results from its advanced breast cancer treatment T-DM1, which is using ImmunoGen's antibody-drug conjugates, or ADCs, to deliver a toxin to targeted cancer cells. With the stock near its highs, the offering could be a smart move for shareholders in the long run despite its dilutive effects.

Seattle Genetics (Nasdaq: SGEN  ) and ImmunoGen are the only two ADC players anywhere near commercialization. With today's offering, both now have ample cash, and plenty of big pharmaceutical partnerships to support them as they grow. Needless to say, today's move lower could represent a nice buying opportunity.

Craving more input? Start by adding ImmunoGen to your free and personalized watchlist so you can keep up on the latest news with the company.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

Motley Fool newsletter services have recommended buying shares of ImmunoGen. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (1) | Recommend This Article (2)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 12, 2012, at 1:45 PM, gfbjohn wrote:

    I have to grin that Mr. Williams, rather than using IMGN's TAP (targeted antibody payload) term, chose to use competitor SGEN's ADC term; essentially the same method of attaching a killer to an antigen that sticks to cancer. Great concept, but if I had ties to IMGN I'd be a little annoyed. That not being so, I do wonder if the medical community will choose one term over the other since we don't really need 2 names for the same wonderful technology. Perhaps Mr. Williams is at the forefront of this?

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10/21/2016 4:00 PM
IMGN $2.28 Up +0.01 +0.44%
ImmunoGen CAPS Rating: ****
SGEN $50.83 Down -0.77 -1.49%
Seattle Genetics CAPS Rating: ****