ImmunoGen (IMGN +0.00%) dropped a startling 19% Tuesday and was down a few more points Wednesday.
Having your top wholly owned drug fail in its lead indication will do that.
The biotech stopped a phase 2 trial testing IMGN901 in patients with small-cell lung cancer. The independent data monitoring committee recommended stopping the trial because patients taking IMGN901 in combination with two chemotherapy treatments, etoposide and carboplatin, didn't fare any better than the patients who only received the chemotherapy regimen.
On the surface, that doesn't seem to justify a 19% stock drop. Small-cell lung cancer is notoriously hard to treat; investors had to understand that it was far from a sure thing.
What seems to have investors spooked is that there was an imbalance in the rate of infection and infection-related deaths between the two treatment groups. ImmunoGen said 198 patients received IMGN901 as a single agent in early trials, and there was only one incidence of infection-related death.
Taking etoposide and carboplatin makes lung cancer patients susceptible to infection, so it's not particularly surprising that adding another agent would exacerbate the situation. Presumably etoposide and carboplatin are killing some of the immune cells responsible for fighting off infections; adding IMGN901 pushes them over the edge.
Etoposide and carboplatin are standard chemotherapies that work by killing cells that are replicating; tumor cells, hair follicles, immune cells -- the drugs will kill them all. IMGN901 is an antibody-drug conjugate. The antibody is supposed to direct the drug to the tumor, where the drug kills the tumor cell.
IMGN901 is targeted to CD56, a cell adhesion molecule that's expressed on the outside of tumors. It's also expressed on -- you guessed it -- immune cells, specifically natural killer and activated T cells. The immune cell killing might make it useless as a treatment for solid tumors, but IMGN901 might still be effective for blood cancers, such as myeloma.
The other possibility -- the one that has investors worried -- is that IMGN901 might be killing immune cells because the toxic drug is detaching from the antibody and killing those cells like any other untargeted chemotherapy. If that's the case -- and I don't think we have enough information to know one way or the other -- it could be bad news for ImmunoGen's platform.
ImmunoGen has deals with five other companies that have drugs in the clinic using its antibody-drug conjugate technology. If IMGN901 is failing to stay together, the linker between the two might need to overhauled. That would be a huge boost for Seattle Genetics (SGEN +0.00%), which has a competing antibody-drug conjugate technology.
It's hard to know for sure, but ImmunoGen looks like a reasonable bad-news buy at this point. Even if IMGN901 is dead, as long as the technology is still working, the haircut it has gotten is unjustified. ImmunoGen still has three other wholly owned drugs in the clinic and the aforementioned partners, one of which is already generating royalties.
A pair trade -- buying ImmunoGen and Seattle Genetics -- could make the bad-news buy less risky. If it turns out ImmunoGen's technology is the issue, Seattle Genetics will presumably be more valuable, but the upside for ImmunoGen if the issue is molecule-specific is much higher than any downside for Seattle Genetics.
