What happened

Shares of ImmunoGen (IMGN) jumped 13% on Wednesday on no obvious news, as the biotech remains a play toy for day traders.

So what

ImmunoGen is sitting in limbo right now awaiting data from its phase 3 study, dubbed Forward I, which is testing its lead drug mirvetuximab as a monotherapy in patients with ovarian cancer. With the trial fully enrolled, management expects data from the study in the first half of next year, setting up a potential approval in late 2019 or early 2020.

Valuing a biotech with an upcoming binary event is squishy -- for lack of a better word -- because there are a lot of variables that have to be estimated, including the likelihood of a positive outcome and the price-to-sales multiple investors will eventually assign the company once the drug is on the market. That lack of clarity can result in a wide trading range for the stock price, allowing day traders to jump in and out as momentum changes.

Man extending a bull figurine with a bear figurine in background

Image source: Getty Images.

Now what

Long-term investors can ignore the daily gyrations and focus on the fundamentals, which aren't likely to change until the upcoming data release. Management has indicated that it's started initial planning for a launch, but hasn't invested much, which seems like a prudent move given ImmunoGen's limited resources.

Investors also should be watching the company's earlier-stage pipeline drugs, IMGN 779 and IMGN 632, which treat acute myeloid leukemia, as well as an ongoing study called Forward II that's testing combination treatments with mirvetuximab. If Forward I fails, it'll be a big blow to ImmunoGen, but at least the biotech has a backup plan.