This FDA Approval Is Actually a Big Deal

As we've learned in recent years, getting an approval from the Food and Drug Administration is only half the battle. Successfully commercializing and launching the drug is the other half of the battle; and it's taken down some potential blockbusters, including Dendreon's (NASDAQ: DNDN  ) prostate cancer treatment, Provenge. The high price of the treatment has kept many physicians from prescribing Provenge, causing peak sales estimates of the drug to fall rapidly since its approval.

However, right now I'm going to ask you to do something completely counterintuitive to your normal mode of thinking (and my own for that matter) -- completely ignore the sales aspect of the newly approved Kadcyla (previous T-DM1) from Roche (NASDAQOTH: RHHBY  ) and ImmunoGen (NASDAQ: IMGN  ) , and focus on the potential implications of this new wonder drug.

Kadcyla was approved on Friday as a second-line treatment for HER2-positive metastatic breast cancer. The drug combines Roche's Herceptin -- adding yet another patent-extending indication for its blockbuster cancer drug -- and DM1 from ImmunoGen, which encompasses the company's targeted antibody payload, or TAP, technology that delivers concentrated doses of chemotherapy toxins to cancer cells, which produce a specific protein. In trials, patients treated with Kadcyla demonstrated progression-free survival of 9.6 months and a median overall survival time of 30.9 months. The control arm of GlaxoSmithKline's (NYSE: GSK  ) Tykerb and Roche's Xeloda, produced a PFS of only 6.4 months and 25.1 months of median overall survival. That's a significant improvement.

Peak sales estimates for Kadcyla have ranged from as low as $2 billion to as high as $5 billion from analysts, but, as my Foolish colleague Brian Orelli notes, sales may not pick up right away as further combination therapies including Kadcyla are currently ongoing. Investors were further disappointed last year to find out that royalties on Kadcyla for ImmunoGen would only be in the 3% to 5% range depending on total sales and whether they're inside or outside the U.S.

But again, forget the sales and focus on the drug and its development! Kadcyla is also being tested in late-stage trials as a first-line treatment to late-stage HER2-positive breast cancer, as well as multiple aspects of early stage HER2-positive breast cancer and second-line metastatic cancer. These represent just a snippet of ImmunoGen's multiple clinical trials currently under way. While a drug can produce very dissimilar results when targeted at different cancers, I feel relatively confident that ImmunoGen's TAP technology isn't a one-trick pony. Of course only the clinical trials and FDA can set my prognostications in stone, but data thus far looks promising on multiple fronts.

Another factor to consider is that antibody payload/drug-conjugate technology (depending on whether you're an ImmunoGen or Seattle Genetics (NASDAQ: SGEN  ) fan) is a new and largely untapped combination therapy. I've long felt one of the smartest ways to tackle the drug sector is to focus on companies that develop combination therapies because they create steady and diverse royalty streams and become instant buyout candidates for struggling big pharmas. Aside from Kadcyla, Seattle Genetics' Adcetris is the only other FDA-approved drug that works along the same delivery pathway, and its success thus far has been limited. With Kadcyla's approval all momentum swung to ImmunoGen's side of the fence -- especially considering how many clinical combo trials are still under way with Kadcyla.

Not to inflate ImmunoGen's ego or anything, but it's kind of a big deal; and I'm predicting that in due time it'll be an even bigger deal, either through additional indications for Kadcyla or perhaps a buyout by Roche (which I've long said would be foolish not to snatch up ImmunoGen).

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  • Report this Comment On February 27, 2013, at 7:52 PM, kblumbio wrote:

    Roche pays IMGN a low single digit royalty and thats why IMGN has a sub 1bil MktCap. As far as a takeout Roche has 9 ADC's in the clinic all from SGEN!!!!! Do some DD before you suggest that Roche would be interested in taking out IMGN. Not even likely!!!!

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