What happened

Shares of ImmunoGen (NASDAQ:IMGN) are up 17.5% at 12:50 p.m. EDT after the company announced an option deal with Jazz Pharmaceuticals (NASDAQ:JAZZ) for three antibody-drug conjugate (ADC) drugs targeting blood cancers.

So what

The deal covers IMGN779, a CD33-targeted ADC for the treatment of acute myeloid leukemia that is currently in phase 1 development; IMGN632, a CD123-targeted ADC for blood cancers that's on pace to enter clinical testing before the end of the year; and a third yet-to-be-named drug.

Part of the attraction of ImmunoGen is its ADC platform, which can spit out drugs as fast as ImmunoGen can find antibodies that bind preferentially to tumor cells. Adding the drug conjugate is the relatively easy part now that the company has the platform mastered.

Purple-stained leukemia cells viewed under a microscope

Image source: Getty Images.

ImmunoGen is responsible for developing the programs until Jazz officially opts in for the drugs, although the latter will pay up to $100 million over seven years to support the three programs. ImmunoGen also gets $75 million up front.

When Jazz decides to opt in, it will pay an option exercise fee of mid-double-digit millions or low triple-digit millions per drug -- the rough numbers were all the companies were willing to disclose -- depending on whether Jazz opts in prior to a pivotal clinical trial or waits until the marketing application with the Food and Drug Administration is about to be filed, respectively. After opting in, Jazz is responsible for half of the tab for development and regulatory submissions, and then fully responsible for commercialization with ImmunoGen due milestone payments for regulatory approvals and tiered royalties from mid- to high single digits in the lowest tier to low 10s to low 20s percentages in the highest tier depending on when Jazz opted in. Again, the rough numbers are all investors got.

ImmunoGen has the right to co-commercialize one product in the U.S. or two under undisclosed limited circumstances with the companies sharing profits rather than ImmunoGen receiving milestone and royalty payments.

Now what

There are a lot of unknowns in this deal, which isn't that uncommon as companies usually want to avoid potential future partners to be able to peg their deal to the numbers in the current one. The lack of full disclosure makes it hard to know exactly how good a deal ImmunoGen is getting for its early-stage assets. Nevertheless, superficially it looks like a solid deal with ImmunoGen getting some much-needed cash to fund its lead phase 3 program for its ovarian cancer drug, mirvetuximab soravtansine, as well as decreasing its cash burn rate since Jazz is picking up some of the costs for the programs.

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