What happened

Shares of ImmunoGen, Inc. (IMGN), a clinical-stage biotech developing new cancer therapies, surged 12.3% this morning after an investment bank analyst initiated coverage of the stock with an eye-popping price target. The early gain has settled down to a 10.7% rise as of 12:01 p.m. EST on Wednesday.

So what 

Immunogen's only sales-generating product at the moment is a component of Roche's breast cancer drug, Kadcyla. Even though the company lost $49.1 million in the first nine months of 2017, H.C. Wainwright analyst Debjit Chattopadhyay thinks it's worth $18 per share. That works out to a market cap of around $2.4 billion, which is more than twice yesterday's value.

Rolled-up dollar bills arranged in the shape of an upward sloping chart.

Image source: Getty Images.

Chattopadhyay thinks the outlook for the types of drugs ImmunoGen specializes in, called antibody-drug conjugates, is bright. While I agree, the upgrade on its own really isn't exciting enough to warrant such a big price movement. Unfortunately for those of you who follow ImmunoGen, double-digit price swings without a fundamental basis are all too common.

Now what

ImmunoGen should have some important data for us in 2018 that will let us know if there's a chance the company will start making money soon. Its lead candidate, mirvetuximab soravtansine for the treatment of ovarian cancer patients who have relapsed after standard care, is in a pivotal trial with an interim analysis expected in the first quarter.

In a previous study, 47% of patients similar to those enrolled in the ongoing pivotal trial exhibited tumor shrinkage. Every year, thousands of women relapse after standard chemo fails to eradicate ovarian cancer, which gives this drug aimed at a genetically defined cross-section of this group peak annual sales potential north of $1 billion.

To earn approval and complete a successful launch, ImmunoGen needs to prove initial responses to mirvetuximab are durable enough to increase patients chances of long-term survival without signs of disease progression compared to available treatments. Top-line results are expected in the first half of 2019, but investors will want to keep their eyes peeled for signs of success following the preplanned futility analysis coming up soon.