ImmunoGen's Q2FY14 Earnings Surpass Expectations

Zacks

ImmunoGen Inc.’s (IMGN) second quarter fiscal 2014 (ending Dec 31, 2013) earnings of 4 cents per share, compared favourably to the Zacks Consensus Estimate of a loss of 19 cents and the year-ago loss of 29 cents per share. Results in the reported quarter were boosted by higher revenues.

ImmunoGen’s revenues in the reported quarter jumped to $30.1 million from the year-ago figure of $2.6 million. The massive increase in revenues was primarily due to a jump in license and milestone fees. Revenues in the second quarter were also well above the Zacks Consensus Estimate of $18 million.

Quarter in Detail

ImmunoGen’s revenues comprise research and development support fees, license and milestone fees, royalty revenues and clinical material reimbursement. The company received $25.7 million of license and milestone fees during the quarter compared with $0.4 million received in the year-ago quarter.

The second quarter fiscal 2014 license and milestone fees included $18.2 million of amortization of upfront license fees from Novartis (NVS) for two development and commercialization licences. The license and milestone fees during the quarter also included a $5.0 million milestone from Roche (RHHBY) for the approval of oncology drug Kadcyla in the EU.

We note that ImmunoGen receives and recognizes royalties on Kadcyla sales under an agreement with Roche. The drug was approved in the U.S. in Feb 2013 for the treatment of patients suffering from HER2-positive metastatic breast cancer (mBC). In Nov 2013, the drug was approved in the EU for the same indication. Kadcyla is also being studied for a number of additional indications.

The company recorded $1.9 million of research and development support fees in the second quarter of fiscal 2014 down 5.6% from the year-ago period. The company also recorded $2.3 million of royalty revenues during the quarter.

The company’s total operating expenses decreased 3% to $26.3 million. ImmunoGen reported research and development (R&D) expenses of $20.9 million during the quarter, down 3.7% year over year. The decrease in R&D expenses was primarily due to a decrease in clinical trial related costs following the discontinuation of the IMGN901 study. General and administrative expenses in the reported quarter remained almost flat at $5.4 million.

Outlook for Fiscal 2014

Apart from releasing its financial results, ImmunoGen also maintained its guidance for fiscal 2014. The company maintained its revenue guidance for fiscal year 2014 in the range of $71–$75 million. The Zacks Consensus Estimate of $72 million is within the company’s guidance range.

ImmunoGen also retained its previous net loss guidance of $67 million to $71 million and operating expense guidance in the band of $140 million and $144 million.

Our Take

The company has multiple pipeline related events in the coming quarters. The discontinuation of the IMGN901 study in small-cell lung cancer in Nov 2013 was indeed disappointing. The study had failed to meet the primary endpoint of an improvement in progression-free survival. Similar setbacks will weigh heavily on the stock. We are however encouraged by ImmunoGen’s association with big companies.

ImmunoGen presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks include Zacks Ranked #1 (Strong Buy) Actelion Ltd. (ALIOF).
 

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