This Biotech Stock Looks Like a Good Investment

Terry is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The biotech sector is heating up with new technology platforms that are showing big promise. One such big promising technology comes from a company known as ImmunoGen (NASDAQ: IMGN). ImmunoGen uses a system called the "TAP" technology, also known as Targeted Antibody Payload.  

Currently, antibodies are able to bind to cancer cells but have no effect on killing the target cancer cells. This is where ImmunoGen's technology comes into play as it allows killing cells to bind to the antibodies.

This allows the cells to be known as payloads, or a way for the antibodies to specifically target the cancerous cells. Without the engineered payload, the antibodies can't fight cancer. This type of technology is unique and has shown great promise so far. The pipeline of ImmunoGen is extensive, and the company has partnered its technology platform with many other biotech companies. 

Targeted cancer therapies

As mentioned before, the pipeline is deep, and thus far the company only has one approved drug from the FDA. This approved drug from the FDA is known as Kadcyla. This approved drug is used for the treatment for patients with HER-2 metastatic breast cancer. Patients would have had to previously use Herceptin and taxane chemotherapy, prior to treatment with Kadycla.

Kadcyla is an HER2-binding antibody, known as Trastuzumab. This antibody was created by Genetech, wich is a division of Roche. It uses ImmunoGens' DM1 cancer killing agent to target and kill the cancer cells with greater efficacy. 

The market opportunity for ImmunoGen is huge with its breast cancer drug Kadcyla. ImmunoGen's partner, Genetech, was estimated to make $3.4 billion across markets in the United States, Europe, and other regions from a breast cancer drug. It was wise for ImmunoGen to partner with Roche's Genetech, as it is still expected to be the top selling HER-2 breast cancer drug maker until 2021. 

Even with only one approved drug, ImmunoGen is great for long-term investors to take a look at. It didn't seem to have any trouble partnering with Genetech. It also trades at a relatively low valuation compared to other biotech cancer stocks, like Seattle Genetics (NASDAQ: SGEN)

Cancer therapies advancing

Another company with antibody targeting platform for cancer is Seattle Genetics. The difference, though, is that it derives its technology from monoclonal antibodies. Seattle Genetics also engineers the antibody to be able to target and kill cancer cells like ImmunoGen's technology does. But it engineers antibodies, and combines them with cell killing effects similar to that of chemotherapy. 

Seattle Genetics has a big pipeline of cancer drugs, but the majority are all either pre-clinical or in the phase one stage of testing. Some of these candidates include: Prostate cancer, breast cancer, renal cell carcinoma, and several others. The good part is that it is currently generating revenue with one already FDA approved drug. That drug is Adcetris. 

Adcetris treats a cancer known as Hodgkins Lymphoma. This disease is a cancer of lymph tissue that is often found in the: Spleen, Lymph nodes, Liver, bone marrow, and other sites. The company received about $132 million in sales in the first year of marketing, and expects the same guidance for 2013. 

Buyout potential

As mentioned above Roche's Genetech has partnered with ImmunoGen on the drug Kadcyla. They also both incorporate the same type of technology.They both engineer the antibody that goes out and kills the cancerous cells. I feel that Roche may seek to buyout ImmunoGen as it progresses more through the clinical trials. 

Another possible buyout could come from Merck (NYSE: MRK), because the company is starting to begin a lot of cancer drug programs. I think that it could add ImmunoGen to its portfolio to advance itself greatly in the cancer drug space. Merck has about $17 billion cash on hand, which would be enough if it wants to acquire ImmunoGen. 

Final thought

ImmunoGen's technology seems to work, and the fact that it has already partnered with Genetech shows how much value it truly has. It is currently trading at around $16 per share and holds much value for the future -- whether it is the advancement of all of its drugs in the pipeline, or a possible buyout by Merck or any other big pharma. It can also unlock more value by partnering its technology with other antibody platforms. 

Its breast cancer drug could be earning billions of dollars in the coming years, as we have seen Genetech produce $3.4 billion. There is no doubt that ImmunoGen has the right platform to bring out other drug candidates in the future. The fact that it has partnered with so many companies, such as Amgen, Bayer, and Sanofi, makes it valuable. I believe that it is a long-term investment, and that it is the right time for ImmunoGen to shine. 


Terry Chrisomalis has no position in any stocks mentioned. The Motley Fool recommends ImmunoGen. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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