In Line Q3 Loss at ImmunoGen - Analyst Blog

ImmunoGen Inc. IMGN reported third quarter fiscal 2014 (ending Mar 31, 2014) loss of 29 cents per share, excluding a non-cash expense related to the company's collaboration with CytomX. The company's loss was at par with the Zacks Consensus Estimate but wider than the year-ago loss of 2 cents per share.

ImmunoGen's loss in the reported quarter was 44 cents including the non-cash expense. Results in the reported quarter were affected by lower revenues.

ImmunoGen's revenues in the third quarter fiscal 2014 declined 72.5% year over year to $6.9 million. The massive fall in revenues in the quarter was primarily due to a decrease in revenues from license and milestone fees. Revenues in the fiscal third quarter were also well below the Zacks Consensus Estimate of $13 million.

Quarter in Detail

ImmunoGen's revenues comprise research and development support fees, license and milestone fees, royalty revenues and clinical material revenues. The company received $0.3 million of license and milestone fees during the quarter compared with $22.2 million received in the year-ago quarter.

ImmunoGen's prior-year quarter license and milestone fees included $11.1 million of amortization of upfront license fees from Novartis NVS for a development and commercialization license. License and milestone fees during the third quarter fiscal 2013 also included a $10.5 million milestone payment from Roche (RHHBY) for the approval of oncology drug Kadcyla in the U.S.

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. In Nov 2013, the drug was approved in the EU for the same indication. The company recorded $2.6 million of royalty payments from Roche during the third quarter fiscal 2014 for sales of Kadcyla in the fourth quarter of calendar year 2013.

ImmunoGen's research and development support fees in the third quarter of fiscal 2014 were down 13.7% to $1.9 million. The company also recorded $2.1 million of clinical materials revenue during the quarter compared with $0.7 million in the year-ago quarter.

The company's total operating expenses increased 68.4% to $44.3 million. ImmunoGen reported research and development (R&D) expenses of $38.3 million during the quarter, up 79.6% year over year. The increase in R&D expenses was primarily due to a non-cash expense related to the company's collaboration with CytomX in Jan 2014. General and administrative expenses in the reported quarter increased 20.9% to $5.4 million.

Fiscal 2014 Outlook

Apart from releasing its financial results, ImmunoGen also updated its guidance for fiscal 2014. The company lowered its revenue guidance for fiscal 2014 to the range of $60–$64 million from the previous guidance range of $71–$75 million. The Zacks Consensus Estimate of $74 million is well above the company's lowered guidance.

ImmunoGen also widened its net loss guidance to $71−$75 million from $67−$71 million. Operating expense for fiscal 2014 is now expected in the band of $133 million and $137 million, down from the previous range of $140−$144 million.

Our Take

ImmunoGen's third quarter fiscal 2014 results were disappointing and the company's new guidance also disappointed expectations. However, the company has multiple pipeline related events in the coming quarters and we expect investors focus to remain on these events. We are also encouraged by ImmunoGen's alliances with big companies.

ImmunoGen presently carries a Zacks Rank #2 (Buy). Some other stocks worth considering include Zacks Ranked #1 (Strong Buy) Questcor Pharmaceuticals, Inc. QCOR.