What happened

News that Irish biotech Jazz Pharmaceuticals (NASDAQ:JAZZ) had signed on to collaborate with Immunogen Inc. (NASDAQ:IMGN)in the development of drugs in the smaller, Massachusetts-based company's pipeline sent Immunogen shares soaring Tuesday, and ongoing optimism about the deal lifted those shares an additional 11.7% in Wednesday's trading session.

So what

Last fall, Immunogen announced a restructuring that included a plan to cut its workforce and seek out partners to aid it as it attempts to bring key drug candidates to market. Tuesday's news that Jazz Pharmaceuticals will fill that role for three of Immunogen's hematology drugs is just one piece of that plan.

A man sitting with his back against a wall as money falls from the sky around him.


Jazz Pharmaceuticals is handing Immunogen a check for $75 million up front, and has agreed to provide $100 million in additional funding over the next seven years to support R&D efforts. In return, Jazz Pharmaceuticals gains the right to opt into Immunogen's IMGN779, a CD33-targeted ADC for acute myeloid leukemia, which is in phase 1 studies; IMGN632, a CD123-targeted ADC for the potential treatment of a range of blood cancers, which is also in phase 1 studies; and one other as-yet-to-be-disclosed drug.

Now what

Jazz Pharmaceuticals can opt into these drugs up until either the start of a pivotal study or prior to a FDA filing for approval. If it opts in before a pivotal trial begins, it will pay an option exercise fee in the mid-double-digit millions of dollars. If it waits until before the FDA filing, then it will be on the hook for low-triple-digit millions. 

If the drug pans out, Immunogen can also receive milestone payments tied to achieving regulatory approvals, plus royalties on sales in percentages ranging from the mid-single digits to the low 20s. Immunogen also retains the right to say "no thanks" to milestone and royalty payments on at least one drug candidate, so that it can co-commercialize it instead.

The agreement takes some pressure off Immunogen, bolsters its balance sheet, and generally, provides it with more financial wiggle room to pursue development of its core drugs, including its lead product candidate, mirvetuximab soravtansine, which is in Phase 3 trials as a treatment for FRα-positive platinum-resistant ovarian cancer. 

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