What: Shares of ImmunoGen (NASDAQ:IMGN), a biopharmaceutical company focused on developing antibody-drug conjugates to be used in the fight against cancer, rocketed higher by 25% in January based on data from S&P Capital IQ following a much better-than-expected second-quarter earnings report.
So what: Announced in the morning of the last trading day of the month, ImmunoGen reported revenue of $48.3 million, a 60.5% increase over the $30.1 million reported in Q2 2014, and net income of $13.6 million, or $0.16 per share, compared to net income of $3.8 million, or $0.04 per share last year. By comparison, Wall Street was looking for ImmunoGen to report just $33.5 million in revenue and lose $0.05 per share.
ImmunoGen notes that the bulk of the revenue increase came from milestone and licensing revenue which increased to $41.4 million from $25.7 million year-over-year. Royalty payments for the sale of breast cancer drug Kadcyla doubled to $4.6 million from $2.3 million in the prior-year quarter.
Looking ahead, ImmunoGen reaffirmed its previous revenue guidance for the year of $100 million to $105 million, and still expects its net loss to be between $60 million and $65 million. Furthermore, it anticipates total cash used in operations will range between $55 million and $60 million, meaning ImmunoGen has enough cash on hand to make it into fiscal 2016.
Now what: Overall this was a pretty solid report, of course we have to come to terms with the fact that a company such as ImmunoGen which relies on its intellectual property to generate revenue is bound to have both upside and downside surprises from time to time.
The key takeaway here is that ImmunoGen can find a number of ways to monetize its technology so it doesn't have to continuously dilute shareholders with common stock offerings. The company's 60.5% increase in revenue is a testament to what it can do with collaborative and licensing agreements.
On one hand I really admire ImmunoGen's deep pipeline, which consists of 13 compounds in clinical testing and another nine in preclinical studies. Not only does it have four in-house products under development, but it also is partnered with seven big names in the pharmaceutical business. With close to two dozen ways to hit a home run I'd certainly suggest ImmunoGen has a good chance of success.
On the flipside, ImmunoGen is also a long ways away from bringing anything else to market beyond Kadcyla for breast cancer. What this means for investors is the expectation for ongoing losses, and perhaps eventual share dilution through a common stock sale. It's understandable for investors to be disappointed if profits are still years away.
Personally, I believe ImmunoGen shares are still cheap here and I'd suggest that highly risk-tolerant biotech investors dig a bit deeper into this company.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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