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ImmunoGen, Inc. Message Board

  • slumdawg2011 slumdawg2011 Oct 26, 2012 7:17 PM Flag

    Royalty math

    If I understood correctly:

    Say sales for 2013 reaches 700M, then:

    3% for first 250M = 7.5M
    plus 3.5% for 250-400M = 3.5% of 150M = 5.25M
    plus 4% for 400-700M = 4% of 300M = 12M
    For a grand total of 24.75M for 2013 vs. 35M if it was 5% for all 700M in sales. So royalties for 2013 will be 10.25M less. IMGN also gets milestone payments upon approval of 15.5M, + 24.75M = 43.25M for 2013.

    Perjeta, another naked antibody is priced almost 33% more than Herceptin. T-DM1 might also be used longer than Herceptin. It is not unreasonable to think that T-DM1 might at least be priced at 50% or more than Herceptin.

    Say sales for 2013 reaches 1B, then:
    3% for first 250M = 7.5M
    plus 3.5% for 250-400M = 3.5% of 150M = 5.25M
    plus 4% for 400-700M = 4% of 300M = 12M
    Plus 5% for 700-1B=5% of 300M= 15M
    7.5+5.25+12+15M= 39.75 grand total vs. 50M if it was 5% of the 1B in sales. 39.75 + 15.5M in milestone payments = 55.25M for 2013.

    So really, the main difference is the 10.25M less per year. It's a huge royalty difference for 2013-2014. but becomes less significant in 2015 onwards.

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    • blackmenrock Oct 29, 2012 11:55 PM Flag

      PDLI will likely also be getting 3% on the Heceptin portion of T-dm1 until their patent expires.
      On PDLI's investor presentation slides they claim that Roche has estimated peak T-DM1 sales at greater than 1bil. That appears far short of the 6bil Heceptin now enjoys. Either they like to give ultra conservative estimates or I've missed something. I have always assumed that T-DM1 would follow a similar track as Herceptin.
      Also, even as successful as Herceptin has been, they paid just 700k to collaborators (PDLI) the first year on the market.
      I'll just pass here for now. I don't get it yet.

    • Yes but they have the royalty ramp in both the US AND ROW so the loss is two times 10.25M or $20.5M per year.

    • blackmenrock Oct 29, 2012 12:05 AM Flag

      I think your math is better than most analysts.
      My unbiased look. (Since I don't currently own)
      Based on a 6000 HER2+ relapse population plus those relaped patients still living from prior years, it could produce 750ml - 1bil with the current indication and pricing similar to SGEN. The floodgate could really open quickly if front-line approval comes late 2014 as planned.
      But, question. Is there no current screening test which identifies which HER2+ patients will benefit and those who will not.

      • 1 Reply to blackmenrock
      • BMR, see my post in SGEN MB. I am not in onco so I am not too sure about mBC stat. Where did you get 6000HER2+ relapse? Is that even after Herceptin treatment in adjuvant setting?
        With regards to your HER2 screening question, I believe they have seen cases where low HER2 or HER2- patients actually responded well to Herceptin. I have to read more on HER2 tests.
        BTW, probably no chance that sales can be 700M for 2013, unless you are right about the 6000 HER2+ figure. 70M may turn out to be more like it.
        Probably best to ask IR.

    • Why is Sendek forecasting a decrease from 176 to 126M for top royalties in 2018, when 1st line would have been approved, aside from gastric cancer? With 4B in sales that would still be more than ~190 M in royalties. Perhaps the 2% royalties in countries with no t-dm1 IP?

      • 1 Reply to slumdawg2011
      • you are right, there was gross over reaction due to management's loss in credibility. The math/ actual dollar difference is not that great and by year 2, T-DM1 royalties may totally fund IMGN development.

        I agree with some of the statements made on the IV board, IMGN should continue partnering. Their ability to move internal programs forward is questionable at best. Also there's some questions about the linker used in 901. If it's an old linker 901 may not be effective and needs to be redone with a different linker, not moved forward so IMGN can keep up the illusion of having something in late stages.

        Junius, IR and the CFO need to be replaced. Pien for President is my goal!

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