North America Equity Research
`22 February 2013
`
`Neutral
`IMGN, IMGN US
`Price: $14.30
`21 February 2013
`
`Biotechnology
`Cory Kasimov AC
`(1-212) 622-5266
`cory.w.kasimov@jpmorgan.com
`Matthew J. Lowe, Ph.D.
`(1-212) 622-0848
`matthew.j.lowe@jpmorgan.com
`
`J.P. Morgan Securities LLC
`
`ImmunoGen
`Kadcyla Approved, as Expected; Roche Launching
`with a Premium Price - ALERT
`
`Today’s FDA approval of Kadcyla (T-DM1) for the treatment HER2-positive
`metastatic breast cancer (mBC) was essentially a foregone conclusion, in our view.
`However, Roche (covered by JPM’s EU Pharma analyst Alexandra Hauber)
`announced a price point ($9,800/month) that is higher than expected and represents a
`significant premium vs. Perjeta (and obviously Herceptin). While positive, we’d note
`that IMGN’s partnership with Roche for Kadcyla involves modest economics (tiered
`low-to-mid single digit royalty on sales), which in and of itself does not justify owning
`IMGN shares, in our view. We believe this development does indeed further validate
`IMGN’s exciting ADC technology platform, but to justify a premium valuation,
`IMGN needs to generate meaningful data with one of its other antibody assets,
`preferably one that is fully owned. On that note, we eagerly await Phase 2 data for
`IMGN901 in SCLC in 2H13. Maintain Neutral.
`
` Kadcyla (T-DM1) approved, as expected. Kadcyla was approved for HER2-
`positive mBC pts who have received prior treatment with Herceptin and a taxane
`chemotherapy. Approval was granted slightly ahead of Tuesday's 2/26 PDUFA date,
`and the product should be available in the US within two weeks.
`
` Pricing higher than expected. Kadcyla will be priced at $9,800/month. This
`represents a significant premium vs. Perjeta (~$5,900/month) and Herceptin
`(~$4,500/month). While this could boost sales in later lines of mBC therapy, for the
`more important earlier lines of therapy (with longer durations of therapy), a price
`cap for Kadcyla therapy could be put in place. We had an opportunity to speak with
`Roche this morning, and they felt that it’s too early to comment on potential caps.
`This is something that Genentech/Roche has done before (i.e. Avastin) as this price
`point may not be sustainable in earlier lines of therapy. For the current indication,
`Roche assumes an average duration of therapy of 9.6 mos, implying an average cost
`per patient of ~$94k.
`
` We view IMGN’s economics on Kadcyla as modest. In territories where there is
`valid IP (includes US, EU, and Japan among others), the royalty rate is 3% of net
`sales up to $250M, 3.5% from $250M-$400M, 4% from $400M-$700M, and 5%
`above $700M. Where there is no valid IP, the royalty is a flat 2%. In addition, the
`royalty rate is reset annually. In other words, it starts at 3% each year before annual
`sales exceed $250M in a particular region where it then jumps to the next tier and is
`applied only to incremental sales. Moreover, the tiered royalty applies separately to
`two territories (US & ROW). Net sales need to exceed the different thresholds in a
`particular region for the royalty to increase in only that region (i.e. could be 4% in
`US and 3% in ROW at the same time). Thus, for the 5% royalty to kick in on a WW
`basis, global sales would need to eclipse at least $1.4B ($700M+ in the US and
`$700M+ in the ROW). We believe these terms cap the value of Kadcyla to IMGN.
`
`We are confident in Kadcyla's outlook in mBC. While we assume peak
`worldwide sales of >$5B, ~65% of this is in the adjuvant setting. With what we view
`as modest economic terms, we await the emergence of another candidate in the
`company’s pipeline to justify a premium valuation.
`
`See page 2 for analyst certification and important disclosures.
`J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
`the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
`factor in making their investment decision.
`
`www.jpmorganmarkets.com
`
`IMMUNOGEN 2268, pg. 1
`Phigenix v. Immunogen
`IPR2014-00676
`
`

`

`Cory Kasimov
`(1-212) 622-5266
`cory.w.kasimov@jpmorgan.com
`
`North America Equity Research
`22 February 2013
`
`Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research
`analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document
`individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views
`expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of
`any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views
`expressed by the research analyst(s) in this report.
`Important Disclosures
`
` Market Maker: JPMS makes a market in the stock of ImmunoGen.
` Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: ImmunoGen.
`Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan–
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`research.disclosure.inquiries@jpmorgan.com.
`
`ImmunoGen (IMGN, IMGN US) Price Chart
`
`Price($)
`
`32
`
`24
`
`16
`
`8
`
`0
`
`N $9
`
`N $10
`
`Date
`
`N $7
`
`N $8
`
`N $11
`
`
`
`Rating Share Price
`($)
`6.24
`12.33
`13.47
`13.90
`13.78
`
`Price Target
`($)
`7.00
`8.00
`9.00
`11.00
`10.00
`
`01-Oct-10 N
`04-Aug-11 N
`28-Oct-11 N
`06-Aug-12 N
`26-Oct-12 N
`
`Oct
`06
`
`Jul
`07
`
`Apr
`08
`
`Jan
`09
`
`Oct
`09
`
`Jul
`10
`
`Apr
`11
`
`Jan
`12
`
`Oct
`12
`
`Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
`Initiated coverage Oct 01, 2010.
`
`The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire
`period.
`J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated
`Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe:
`J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
`average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve
`months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s)
`coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
`the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if
`applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy
`reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a
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`in the Important Disclosures section of this report, the certifying analyst’s coverage universe can be found on J.P. Morgan’s research
`website, www.jpmorganmarkets.com.
`Coverage Universe: Kasimov, Cory W: Aegerion Pharmaceuticals (AEGR), Alkermes, Inc. (ALKS), Arena Pharmaceuticals, Inc.
`(ARNA), Ariad Pharmaceuticals (ARIA), Array BioPharma (ARRY), BioMarin Pharmaceuticals (BMRN), Clovis Oncology (CLVS),
`Dendreon (DNDN), Emergent BioSolutions (EBS), Exelixis, Inc (EXEL), Geron Corp (GERN), ImmunoGen (IMGN), Incyte
`
`2
`
`IMMUNOGEN 2268, pg. 2
`Phigenix v. Immunogen
`IPR2014-00676
`
`

`

`Cory Kasimov
`(1-212) 622-5266
`cory.w.kasimov@jpmorgan.com
`
`North America Equity Research
`22 February 2013
`
`Corporation (INCY), Infinity Pharmaceuticals (INFI), Lexicon Pharmaceuticals (LXRX), MannKind Corporation (MNKD), Nektar
`Therapeutics (NKTR), Onyx Pharmaceuticals (ONXX), Orexigen Therapeutics (OREX), Rigel Pharmaceuticals (RIGL), Savient
`Pharmaceuticals (SVNT), Seattle Genetics (SGEN), The Medicines Company (MDCO), VIVUS, Inc (VVUS), ZIOPHARM Oncology
`(ZIOP)
`
`J.P. Morgan Equity Research Ratings Distribution, as of January 1, 2013
`Overweight
`Neutral
`Underweight
`(buy)
`(hold)
`(sell)
`44%
`44%
`12%
`J.P. Morgan Global Equity Research Coverage
`53%
`46%
`34%
`IB clients*
`42%
`49%
`9%
`JPMS Equity Research Coverage
`71%
`62%
`51%
`IB clients*
`*Percentage of investment banking clients in each rating category.
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`
`3
`
`IMMUNOGEN 2268, pg. 3
`Phigenix v. Immunogen
`IPR2014-00676
`
`

`

`Cory Kasimov
`(1-212) 622-5266
`cory.w.kasimov@jpmorgan.com
`
`North America Equity Research
`22 February 2013
`
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`
`4
`
`IMMUNOGEN 2268, pg. 4
`Phigenix v. Immunogen
`IPR2014-00676
`
`