Equity Research
`
`November 3, 2014
`
`Price: $9.26 (10/31/2014)
`Price Target: $8.50
`
`MARKET PERFORM (2)
`
`Boris Peaker, Ph.D., CFA
`646.562.1377
`boris.peaker@cowen.com
`
`Key Data
`NASDAQ: IMGN
`Symbol
`$17.80 - 7.70
`52-Week Range:
`$795.8
`Market Cap (MM):
`$(136.1)
`Net Debt (MM):
`$1.66
`Cash/Share:
`85.9
`Dil. Shares Out (MM):
`Enterprise Value (MM): $680.4
`ROIC:
`NA
`ROE (LTM):
`NA
`BV/Share:
`$0.69
`Dividend:
`NA
`
`2014A
`FY (Jun)
`Earnings Per Share
`$(0.13)
`Q1
`$0.04
`Q2
`$(0.44)
`Q3
`$(0.31)
`Q4
`$(0.84)
`Year
`$(0.84)
`Consensus EPS
`Consensus source: Thomson Reuters
`
`2015E
`
`2016E
`
`$(0.26)A
`$0.03
`$(0.16)
`$(0.13)
`$(0.53)
`$(0.70)
`
`-
`-
`-
`-
`$(0.39)
`$(0.63)
`
`Revenue (MM)
`Year
`EV/S
`
`$59.9
`11.4x
`
`$98.3
`6.9x
`
`$90.8
`7.5x
`
`Biotechnology
`
`ImmunoGen
`
`Initiating Coverage
`
`Initiation: Kadcyla Fully Priced In,
`Pipeline Value Questionable
`
`The Cowen Insight
`We are initiating coverage of ImmunoGen with a Market Perform rating. IMGN is
`developing antibody-drug based therapies for cancer treatment. It has one approved
`product (Kadcyla) under a collaboration with Roche, and several partnered/wholly-
`owned programs in early stage development. While we like Kadcyla, we believe its
`royalties to IMGN are fully valued and are skeptical about the pipeline.
`
`Kadcyla Is Fully Priced Into Stock, $8.50/Share Includes Pipeline
`Making very generous assumptions of ~$7B/yr in peak sales for Kadcyla, we arrive
`at an NPV of ~$5.50 for this drug. ImmunoGen also has partnership agreements with
`large companies like Amgen, Bayer, Sanofi, and Lilly, and while the timing/magnitude
`of milestone payments is hard to predict, we estimate a $300M (~$3/share) value to
`these partnerships.
`Kadcyla Does Not De-risk Pipeline
`The approval of Kadcyla in 2013 was a landmark moment for IMGN and the antibody
`drug conjugate (ADC) field. We believe that based on this one success, investors are
`putting a premium on ImmunoGen’s pipeline/platform technology and assume the
`company to be more successful in ADC development in the future despite multiple
`failures. However, we believe that Kadcyla’s clinical success is largely due to the
`Herceptin antibody and does not de-risk the ADC platform. This is evidenced by the
`challenges that ImmunoGen has experienced in its own pipeline.
`Concerns With Early Stage Pipeline Candidates
`Two of IMGN’s wholly-owned pipeline candidates (IMGN853 and IMGN529) are in the
`early stages of clinical development. The initial data for these drugs suggests a narrow
`therapeutic window which to us implies poor antibody targeting and/or payload loss.
`This is reminiscent of IMGN901, which at one time was IMGN's leading candidate.
`Following dose reduction, a Phase II study of IMGN901 was terminated due to safety
`and lack of efficacy. Based on similarity of a narrow therapeutic window for IMGN853
`and IMGN529 to IMGN901, we are bearish on both of these drugs. With ~$400-600M
`of value attributed to the pipeline and platform, we see significant room for further
`stock weakness as these assets report data.
`
`www.cowen.com
`
`Please see addendum of this report for important disclosures.
`
`IMMUNOGEN 2147, pg. 1
`Phigenix v. Immunogen
`IPR2014-00676
`
`

`
`Cowen and Company
`Equity Research
`
`ImmunoGen
`November 3, 2014
`
`At A Glance
`
`Our Investment Thesis
`
`We believe there are numerous factors supporting our investment opinion of
`ImmunoGen including (1) Generous Kadcyla commercial potential appears fully priced
`into stock; (2) Expansion of Kadcyla market provides incremental upside; (3) Pipeline
`candidates are still in the early stages of clinical development with no near-term
`catalysts; (4) Lead pipeline candidates may have limited efficacy because of narrow
`therapeutic window. Our current valuation is based on short-term concerns over the
`lack of upcoming catalysts and the clinical risk of ImmunoGen’s pipeline candidates.
`Given the heightened competition in antibody drug conjugates (ADCs), we see a lot of
`competitive risk to ImmunoGen’s platform technology.
`
`Forthcoming Catalysts
`
`■ MARIANNE data readout; YE2014.
`■ IMGN853 data; 1H2015 (ASCO).
`■ IMGN529 data; ASH 2014.
`■ IMGN289 data; 2015.
`■ IMGN779 IND filing; 2H2015.
`
`Base Case Assumptions
`
`Upside Scenario
`
`Downside Scenario
`
`■ Continued robust Kadcyla launch.
`■ Pipeline drugs look OK, but not great.
`Toxicity remains key problem.
`
`■ Kadcyla uptake exceeds investors’
`expectations.
`■ Pipeline drug show competitive and
`differentiated results.
`
`■ Kadcyla ramp disappoints.
`■ Wholly-owned or partnered ADCs fail
`in early stage trials.
`
`Price Performance
`
`Company Description
`
`$18
`
`16
`
`14
`
`12
`
`10
`
`8
`
`ImmunoGen is a biotechnology company focused on the development and
`commercialization of antibody-based therapies for the treatment of cancer. The firm
`currently receives royalties on sales of Roche/Genentech’s HER2-targeting ADC,
`Kadcyla. While Kadcyla is being advanced in other patient populations within breast
`cancer, ImmunoGen is advancing their wholly owned pipeline of early-stage ADC
`drugs and the company has licensed its technology to several partners.
`
`Jan-14
`
`Apr-14
`
`Jul-14
`
`Oct-14
`
`Analyst Top Picks
`
` 
`Celldex Therapeutics
`Idera Pharmaceuticals
`
`Ticker
`CLDX
`IDRA
`
`Price (10/31/2014)
`$16.75
`$2.62
`
`Price Target
`$22.00
`$NA
`
`Rating
`Outperform
`Outperform
`
`Source: Bloomberg
`
`2
`
`www.cowen.com
`
`IMMUNOGEN 2147, pg. 2
`Phigenix v. Immunogen
`IPR2014-00676
`
`

`
`Cowen and Company
`Equity Research
`
`ImmunoGen
`November 3, 2014
`
`Discussion Of Investment Thesis
`
`ImmunoGen is a biotechnology company with a single approved and partnered drug
`(Kadcyla), a wholly-owned pipeline of early stage antibody drug conjugate (ADC)
`drugs, as well as a platform ADC technology that generates upfront and milestone
`payments via licensing agreements. The company’s key ADC platform is designed to
`deliver potent cytotoxic drugs to malignant cells via monoclonal antibodies (mAb).
`Kadcyla is partnered with Roche. It was approved for metastatic breast cancer
`following trastuzumab/anthracycline, and is currently in several studies to expand its
`label in breast cancer and gastric cancer. While Kadcyla is an exciting drug, due to
`ImmunoGen’s limited commercial interest in this asset, we believe that the company’s
`valuation will be largely determined by the success of its pipeline. Given the toxicity
`associated with several of its pipeline assets, and the rapidly evolving competitive
`landscape in the ADC space, we believe that the likelihood of success for
`ImmunoGen’s pipeline is unfavorable at the current valuation.
`
`Kadcyla Fully Priced Into Stock
`
`The approval of Kadcyla was an important milestone for ImmunoGen’s platform as
`well as the ADC space in general. Kadcyla is the first and only ADC approved for solid
`tumors. While Kadcyla sales since its launch have been impressive, the royalty stream
`to ImmunoGen remains minimal, as its royalty is in the low single digits (~4%) and is
`limited to 10 years from launch in each country. Making very generous assumptions
`that Kadcyla will largely capture the entire Herceptin market despite the likely
`competition and/or price pressure from Herceptin biosimilars, and generate peak WW
`sales of ~$7B in 10 years, we still only arrive at an NPV of ~$5.50/share. This NPV
`estimate also assumes that current Kadcyla studies will all be successful, which is
`optimistic. In our view these assumptions are not a base case, but just an indication of
`what investors may already be pricing in at current valuation. As such, while we
`anticipate Kadcyla to continue to succeed in the clinic and in the market, we believe
`that the impact to ImmunoGen’s valuation will be limited. Furthermore, if ImmunoGen
`decides to sell this royalty stream, we anticipate $2-3/share at most.
`
`www.cowen.com
`
`3
`
`IMMUNOGEN 2147, pg. 3
`Phigenix v. Immunogen
`IPR2014-00676
`
`

`
`Cowen and Company
`Equity Research
`
`ImmunoGen
`November 3, 2014
`
`Kadcyla NPV Model
`
`Source: Cowen and Company.
`
`4
`
`www.cowen.com
`
`
`
`($ M M )
`
`Tot al US S ales ($ M M )
`
`% increase y/y
`
`2 0 1 3 E
`
`2 0 1 4 E
`
`2 0 1 5 E
`
`2 0 1 6 E
`
`2 0 1 7 E
`
`2 0 1 8 E
`
`2 0 1 9 E
`
`2 0 2 0 E
`
`2 0 2 1 E
`
`2 0 2 2 E
`
`2 0 2 3 E
`
`2 0 2 4 E
`
`2 0 2 5 E
`
`2 0 2 6 E
`
`2 0 2 7 E
`
`$ 66
`
`0%
`
`$ 399
`
`0%
`
`$ 613
`
`$ 815
`
`$ 1, 031
`
`$ 1, 173
`
`$ 1, 524
`
`$ 2, 106
`
`$ 2, 661
`
`$ 3, 434
`
`$ 3, 529
`
`$ 3, 626
`
`$ 3, 726
`
`$ 0
`
`54%
`
`63%
`
`33%
`
`61%
`
`26%
`
`59%
`
`14%
`
`56%
`
`30%
`
`59%
`
`38%
`
`60%
`
`26%
`
`57%
`
`29%
`
`56%
`
`3%
`
`50%
`
`3%
`
`48%
`
`3%
`
`48%
`
`-100%
`
`0%
`
`$ 0
`
`0%
`
`0%
`
`% WW sales
`
`Tot al E U S ales ($ M M )
`
`% increase y/y
`
`% WW sales
`
`0%
`
`$ 2
`
`0%
`
`0%
`
`0%
`
`$ 79
`
`0%
`
`0%
`
`$ 285
`
`262%
`
`29%
`
`$ 438
`
`$ 585
`
`$ 744
`
`$ 846
`
`$ 1, 123
`
`$ 1, 590
`
`$ 2, 033
`
`$ 2, 651
`
`$ 2, 707
`
`$ 2, 764
`
`$ 2, 822
`
`$ 0
`
`54%
`
`33%
`
`33%
`
`33%
`
`27%
`
`36%
`
`14%
`
`33%
`
`33%
`
`32%
`
`42%
`
`34%
`
`28%
`
`33%
`
`30%
`
`37%
`
`2%
`
`36%
`
`2%
`
`36%
`
`2%
`
`69%
`
`-100%
`
`0%
`
`$ 226
`
`$ 254
`
`$ 398
`
`$ 661
`
`$ 912
`
`$ 1, 272
`
`$ 1, 274
`
`$ 1, 275
`
`$ 1, 276
`
`Tot al RO W S ales ($ M M )
`
`% increase y/y
`
`% WW sales
`
`$ 0
`
`0%
`
`0%
`
`$ 0
`
`0%
`
`0%
`
`$ 70
`
`0%
`
`0%
`
`$ 88
`
`0%
`
`7%
`
`$ 134
`
`$ 178
`
`52%
`
`8%
`
`33%
`
`9%
`
`27%
`
`9%
`
`12%
`
`7%
`
`57%
`
`9%
`
`66%
`
`11%
`
`38%
`
`13%
`
`40%
`
`17%
`
`0%
`
`16%
`
`0%
`
`31%
`
`0%
`
`100%
`
`Tot al W W S ales ($ M M )
`
`$ 67
`
`$ 478
`
`$ 968
`
`$ 1, 342
`
`$ 1, 751
`
`$ 2, 095
`
`$ 2, 596
`
`$ 3, 483
`
`$ 4, 650
`
`$ 6, 129
`
`$ 7, 092
`
`$ 7, 605
`
`$ 7, 763
`
`$ 4, 097
`
`$ 1, 276
`
`32%
`
`16%
`
`7%
`
`2%
`
`-47%
`
`-69%
`
`% increase y/y
`
`0%
`
`0%
`
`103%
`
`39%
`
`30%
`
`20%
`
`24%
`
`34%
`
`34%
`
`Roy alt ies on US sales ($ M M )
`
`% royalty rate
`
`Roy alt ies on E U sales ($ M M )
`
`$ 2
`
`3.0%
`
`$ 0
`
`$ 13
`
`3.2%
`
`$ 2
`
`$ 21
`
`3.5%
`
`$ 9
`
`$ 31
`
`3.7%
`
`$ 14
`
`$ 41
`
`4.0%
`
`$ 20
`
`$ 48
`
`4.1%
`
`$ 27
`
`$ 66
`
`4.3%
`
`$ 32
`
`$ 95
`
`4.5%
`
`$ 46
`
`$ 123
`
`4.6%
`
`$ 69
`
`$ 161
`
`4.7%
`
`$ 91
`
`$ 166
`
`4.7%
`
`$ 122
`
`$ 0
`
`0.0%
`
`$ 125
`
`$ 0
`
`0.0%
`
`$ 0
`
`$ 0
`
`0.0%
`
`$ 0
`
`0.0%
`
`$ 0
`
`0.0%
`
`$ 0
`
`0.0%
`
`% royalty rate
`
`Roy alt ies on RO W sales ($ M M )
`
`% royalty rate
`
`0.0%
`
`$ 0
`
`0.0%
`
`3.0%
`
`$ 0
`
`0.0%
`
`3.1%
`
`$ 2
`
`3.0%
`
`3.3%
`
`$ 3
`
`3.0%
`
`3.4%
`
`$ 4
`
`3.0%
`
`3.6%
`
`$ 5
`
`3.0%
`
`3.8%
`
`$ 7
`
`3.0%
`
`4.1%
`
`$ 8
`
`3.0%
`
`4.4%
`
`$ 13
`
`3.2%
`
`4.5%
`
`$ 23
`
`3.5%
`
`4.6%
`
`$ 35
`
`3.9%
`
`4.6%
`
`$ 53
`
`4.2%
`
`0.0%
`
`$ 53
`
`4.2%
`
`$ 0
`
`0.0%
`
`$ 0
`
`0.0%
`
`$ 2
`
`$ 15
`
`$ 32
`
`$ 47
`
`$ 65
`
`$ 81
`
`$ 105
`
`$ 149
`
`$ 205
`
`$ 276
`
`$ 324
`
`$ 178
`
`$ 53
`
`$ 0
`
`$ 0
`
`Tot al W W Roy alt y Rev enue t o IM GN ($ M M )
`
`% increase y/y
`
`0%
`
`113%
`
`48%
`
`38%
`
`23%
`
`30%
`
`42%
`
`38%
`
`35%
`
`17%
`
`-45%
`
`-70%
`
`-100% #DIV/0!
`
`Tax adjusted EBIT
`
`
`
`2.0
`
`
`
`15.1
`
`
`
`31.5
`
`
`
`45.5
`
`
`
`61.6
`
`
`
`72.6
`
`
`
`92.2
`
`
`
`114.4
`
`
`
`134.3
`
`
`
`179.4
`
`
`
`210.5
`
`
`
`116.0
`
`
`
`34.7
`
`
`
`-
`
`
`
`-
`
`0%
`
`2%
`
`4%
`
`6%
`
`10%
`
`12%
`
`23%
`
`34%
`
`35%
`
`35%
`
`35%
`
`35%
`
`35%
`
`35%
`
`Tax rate
`
`0%
`
`Kadc y la roy alt ies f ree c ash f low
`
`2. 02
`
`15. 1
`
`31. 5
`
`45. 5
`
`% y/y gro wth
`
`Discount Period
`
`Discount Factor
`
`61. 6
`
`35%
`
`72. 6
`
`18%
`
`92. 2
`
`27%
`
`114. 4
`
`24%
`
`134. 3
`
`17%
`
`179. 4
`
`34%
`
`210. 5
`
`17%
`
`116. 0
`
`-45%
`
`34. 7
`
`-70%
`
`0. 0
`
`0. 0
`
`-100%
`
`# DIV/0!
`
`
`
`-
`
`
`
`1.00
`
`
`
`2.00
`
`
`
`3.00
`
`
`
`4.00
`
`
`
`5.00
`
`
`
`6.00
`
`
`
`7.00
`
`
`
`8.00
`
`
`
`9.00
`
`
`
`10.00
`
`
`
`11.00
`
`
`
`12.00
`
`
`
`13.00
`
`P V of Kadc y la roy alt ies F ree C ash F low
`
`2. 0
`
`15. 1
`
`28. 1
`
`36. 3
`
`43. 8
`
`46. 2
`
`52. 3
`
`58. 0
`
`60. 7
`
`72. 5
`
`75. 9
`
`37. 3
`
`10. 0
`
`0. 0
`
`0. 0
`
`
`
`1.00
`
`
`
`1.00
`
`
`
`0.89
`
`
`
`0.80
`
`
`
`0.71
`
`
`
`0.64
`
`
`
`0.57
`
`
`
`0.51
`
`
`
`0.45
`
`
`
`0.40
`
`
`
`0.36
`
`
`
`0.32
`
`
`
`0.29
`
`
`
`0.26
`
`
`
`0.23
`
`Discount Rate
`
`Perpetual Growth Rate
`
`Final year FC F
`
`Terminal Value
`
`P resent Value of C ash F low s
`
`Fully Diluted Shares Outstanding
`
`N P V of Kadc y la roy alt ies
`
`12%
`
`0%
`
`$0
`
`$0
`
`$ 521
`
`95
`
`$ 5. 47
`
`IMMUNOGEN 2147, pg. 4
`Phigenix v. Immunogen
`IPR2014-00676
`
`

`
`Cowen and Company
`Equity Research
`
`ImmunoGen
`November 3, 2014
`
`Long Wait For Wholly-Owned Pipeline
`
`All of ImmunoGen’s wholly-owned pipeline candidates are in the early stages of
`clinical development and present no near term catalysts. While this on its own would
`imply significant risk, we believe early clinical data suggests that the efficacy of these
`early stage ADCs may be limited due to their narrow therapeutic windows. Moreover,
`we do not view Kadcyla as a validation of IMGN’s ADC platform since we believe that
`the majority of its efficacy is attributed to the antibody (Herceptin), and the data
`observed to date can easily be the result of slow payload loss vs. targeted payload
`delivery.
`
`Pipeline Still Risky, Toxicity Contradicts Purported Mechanism
`
`IMGN853 is ImmunoGen’s folate receptor  (FR)-targeting ADC in development for
`the treatment of ovarian and endometrial cancer and is currently IMGN’s lead pipeline
`candidate. While IMGN853 clinical data is limited, it suggests a fate similar to
`IMGN901. Early Phase I data has suggested ocular toxicity to correlate with early drug
`exposure, with 40% (n=10) and 100% (n=5) of patients exhibiting ocular toxicity at 5
`mg/kg and 7.0 mg/kg doses, respectively. To address this, IMGN has implemented
`dosing based on adjusted ideal body weight (AIBW) to improve overall drug exposure
`while minimizing early exposure levels. While early data using the AIBW dosing
`scheme suggests a reduction in ocular toxicity, we believe in larger studies there is a
`high risk of dose reduction. If the dose of IMGN853 is reduced further, the efficacy
`can suffer substantially increasing the risk of failure.
`
`IMGN529 is another early stage ADC in IMGN’s pipeline. The CD37-targeting ADC is
`currently in a Phase I trial for the treatment of r/r NHL. Early data has shown that even
`at low doses there is a high incidence of adverse events. Specifically, early-onset
`grade 3/4 neutropenia was reported in 23% (n=22) of treated patients. While IMGN
`has been able to reduce the incidence with prophylactic steroids, they have noted that
`neutropenia has been reported later within a cycle. Moreover, clinical benefit thus far
`has been unimpressive with only two reported PRs. Similar to IMGN853, we believe
`that IMGN529 may be subjected to dose reduction because of toxicity. This will
`ultimately impact efficacy and IMGN529’s chances of success.
`
`We believe that the data for IMGN853, IMGN529, and IMGN 901 brings into question
`the overall mechanism of action for ImmunoGen’s ADC. While often referred to as
`“targeted missiles”, if these ADCs were effectively delivering their payload to the
`desired target, we would expect to see much wider therapeutic windows than what
`one is used to with non-targeted chemotherapies. That does not appear to be the
`case. Alternatively, it is possible that the ADC technology is working, but either the
`targets chosen are too commonly expressed on healthy tissues or the antibody affinity
`for its desired target is just not adequate. Whatever the fundamental cause(s) may be
`for the observed narrow therapeutic windows, we believe that there is a lot of risk in
`ImmunoGen’s pipeline.
`
`Price Target Of $8.50 Based On Kadcyla + Pipeline
`
`We believe that pipeline progress will have a significant impact on ImmunoGen’s value
`in 12-18 months. Despite our concerns about the safety and efficacy of ImmunoGen’s
`leading pipeline assets, we anticipate ImmunoGen will continue to generate upfront
`and milestone partnering revenue from its partners which include Amgen, Eli Lilly,
`Bayer, Roche, and Sanofi. It is difficult to predict the timing and magnitude of these
`partnership payments, and in our view there are no direct comps to use as reference.
`
`www.cowen.com
`
`5
`
`IMMUNOGEN 2147, pg. 5
`Phigenix v. Immunogen
`IPR2014-00676
`
`

`
`Cowen and Company
`Equity Research
`
`ImmunoGen
`November 3, 2014
`
`Most of these partnerships lack proof of concept data, and it appears that $100-150M
`is a reasonable valuation for oncology companies without strong proof of concept
`data in today’s market. Since ImmunoGen has multiple partnerships, we believe that
`$300M is a reasonable estimate for the value of these partnerships. This suggests a
`value of ~$3/share based on 95M fully diluted share count. Combining this pipeline
`value with our $5.50/share NPV for Kadcyla results in our price target of $8.50/share.
`
`Will Future Repeat Past?
`
`ImmunoGen has had numerous failures, but most notably and most recently was that
`of IMGN901. IMGN901 was an ADC targeting the CD56 antigen and at one time was
`IMGN’s lead pipeline candidate. In December 2012, IMGN reported data from a Phase
`I trial of IMGN901 used in combination with lenalidomide and dexamethasone for the
`treatment of CD56+ r/r multiple myeloma. IMGN901 had previously shown single
`agent activity in earlier trials. The combination regimen demonstrated efficacy, as all
`evaluable patients exhibited a minimal response or better, and supported further
`development of IMGN901.
`
`IMGN initiated a Phase II trial (NORTH) of IMGN901 for the treatment of small cell
`lung cancer (SCLC) in March 2012. The trial was designed to assess the safety and
`efficacy of IMGN901 in combination with etoposide and carboplatin (E/C) against E/C-
`alone. In February 2013, IMGN announced that enrollment of the first-stage of the
`NORTH trial had been completed and an interim analysis of PFS at six months was
`planned. Shortly thereafter, IMGN reported that a high percentage of patients (30%)
`were reporting grade 3 neuropathy and because of this the starting dose was reduced
`(90 mg/m2 from 112 mg/m2).
`
`In November 2013, IMGN terminated the NORTH study. The trial’s independent data
`monitoring committee (DMC) determined that the addition of IMGN901 to EC-
`chemotherapy was not likely to provide a significant clinical benefit. The DMC noted
`that there was a higher rate of infection and infection-related deaths in the cohort that
`received IMGN901. We suspect that this occurred because the ADC was either
`targeting immune cells (CD56 is expressed on NK cells and activated T-cells, as well
`as neuronal cells) or the payload was prematurely falling off due to linker instability.
`While this failure does not predict the chances of success for IMGN’s current pipeline
`candidates, we believe that the current data for IMGN853 and IMGN529 suggest
`reasons to be cautious.
`
`6
`
`www.cowen.com
`
`IMMUNOGEN 2147, pg. 6
`Phigenix v. Immunogen
`IPR2014-00676
`
`

`
`Cowen and Company
`Equity Research
`
`ImmunoGen
`November 3, 2014
`
`
`
`
`
`ImmunoGen Upcoming Milestones
`
`Source: ImmunoGen, Cowen and Company
`
`
`
`www.cowen.com
`
`7
`
`Date
`
`Stage
`
`Milestone
`
`Kadcyla (Trastuzumab emtansine, T-DM1)
`YE2014
`Phase III
`MARIANNE results in 1st-line HER2+ metastatic BC
`2015
`Phase III
`GATSBY results in advanced 2nd-line HER2+ gastric cancer
`2015
`Filing
`U.S./E.U. filing for 1st-line HER2+ metastatic BC
`2015
`Filing
`U.S./E.U. filing for metastatic HER2+ gastric cancer
`2H2015
`Phase III
`Results from T-DM1 study in neoadjuvant BC
`IMGN853
`2015
`IMGN529
`YE2014
`2015
`IMGN289
`2015
`IMGN779
`2H2015
`
`Phase I
`
`Data readout in head & neck, NSCLC
`
`IND
`
`IND submission
`
`Phase I
`
`Dosing schedule & efficacy data
`
`Phase I
`Phase I
`
`Safety & PK data (ASH)
`Enrollment of expansion cohort
`
`IMMUNOGEN 2147, pg. 7
`Phigenix v. Immunogen
`IPR2014-00676
`
`

`
`Cowen and Company
`Equity Research
`
`ImmunoGen
`November 3, 2014
`
`
`
`ImmunoGen Pipeline
`
`Source: ImmunoGen
`
`8
`
`www.cowen.com
`
`
`
`IMMUNOGEN 2147, pg. 8
`Phigenix v. Immunogen
`IPR2014-00676
`
`

`
`Cowen and Company
`Equity Research
`
`ImmunoGen
`November 3, 2014
`
`Breast Cancer
`
`Breast Cancer Subtypes
`
`Breast cancer has arguably been the malignancy that has benefited the greatest from
`improvements in radiation, chemotherapy, and the advent of targeted therapy. Over
`the last 50 years, overall survival at 10 years has more than tripled and 5-year survival
`is now nearly 90%. Despite this, breast cancer remains the second largest cancer killer
`of women, with ~40,000 breast cancer related deaths expected in the U.S. in 2014. At
`the forefront of breast cancer therapeutic development has been the recognition of
`different breast cancer subtypes.
`
`Broad classification of breast cancer is done by examining the expression status of
`three molecular markers: HER2, estrogen receptor (ER) and progesterone receptor
`(PR). Most women diagnosed with breast cancer will undergo surgery to remove the
`tumor. Once the tumor can be pathologically examined and assessed for marker
`status, an appropriate adjuvant therapeutic regimen can be selected. The three
`general subtypes include: (1) ER/PR-positive (ER/PR+), (2) HER2-positive (HER2+)
`and (3) triple-negative breast cancer (TNBC). Although a detailed description of
`breast cancer treatment protocols is beyond the intended scope of this report, the
`basic approach is to add a targeted therapy where possible to chemotherapy (non-
`targeted) usually after surgery and/or radiation.
`
`1. ER/PR-positive: ER/PR-positive breast cancers account for two-thirds of all breast
`cancers and are considered the most treatable. Following surgery and radiation,
`patients with ER/PR+ tumors will receive hormone therapy. Hormone therapies act
`to reduce the levels of estrogen or inhibit the estrogen receptor. Tamoxifen and
`aromatase inhibitors are the two most commonly used hormone therapies.
`
`2. TNBC: Triple-negative breast cancers (TNBC) lack expression of all three receptors
`and account for 15% of all breast cancers. TNBC is considered the most aggressive
`and deadliest of all breast cancer subtypes. Almost by definition, there is no
`approved targeted therapy for TNBC due to lack of unique targets.
`
`3. HER2+: HER2+ breast cancers account for 20-25% of all breast cancers. HER2
`amplification serves as a valuable prognostic and predictive biomarker, and is
`associated with shorter overall survival and time to recurrence. There are several
`targeted therapies for HER2+ tumors, and almost all women with HER2+
`malignancies are likely to get at least one of these drugs throughout their course of
`treatment.
`
`Therapies Targeting HER2
`
`Trastuzumab (Herceptin): Trastuzumab is an antibody that binds selectively to the
`HER2 protein on the C-terminal portion of domain IV. This is a different epitope of the
`HER2 extracellular domain than the one targeted by pertuzumab. Trastuzumab is also
`the antibody in Kadcyla, and we believe that the activity of trastuzumab itself is largely
`responsible for Kadcyla’s efficacy with the toxic payload making an incremental
`contribution.
`
`Lapatinib (Tykerb): Lapatinib is an orally active small molecule inhibitor of HER2 and
`EGFR. Lapatinib blocks the intrinsic tyrosine kinase activity of the receptors and thus
`blocks downstream intracellular signaling.
`
`www.cowen.com
`
`9
`
`IMMUNOGEN 2147, pg. 9
`Phigenix v. Immunogen
`IPR2014-00676
`
`

`
`Cowen and Company
`Equity Research
`
`ImmunoGen
`November 3, 2014
`
`Pertuzumab (Perjeta): Pertuzumab is a first-in-class HER dimerization inhibitor (HDI),
`designed to prevent the HER2 receptor from dimerizing with other HER receptors
`(EGFR/HER1, HER3 and HER4). Pertuzumab disrupts the formation of HER2-HER3
`receptor dimers and their downstream signaling by selectively binding to the HER2
`protein on the C-terminal portion of domain II.
`
`Trastuzumab-DM1 (T-DM1/Kadcyla): T-DM1 is an antibody drug conjugate (ADC)
`comprised of trastuzumab linked to DM1 (emtansine), an anti-microtubule
`maytansine derivative.
`
`
`
`Molecular Mechanisms of Pertuzumab & T-DM1
`
`Source: Roche Presentation
`
`
`
`
`
`
`
`
`
`
`HER2 Binding: Pertuzumab & Trastuzumab/T-DM1
`
`Source: Roche Presentation
`
`
`
`Prior to the development of trastuzumab, radiation and chemotherapy formed the
`foundation of breast cancer treatment. Since trastuzumab was approved in 1998 it has
`formed the backbone of treatment options for HER2+ BC. In 2013, sales of Herceptin
`topped $6.0B. Currently, in the adjuvant setting HER2+ patients are often treated with
`trastuzumab and chemotherapy. For 1st-line treatment of mBC, HER2+ patients will
`typically be treated with trastuzumab/pertuzumab/taxane. If mBC patients progress or
`relapse following 1st-line treatment, patients are eligible to receive Kadcyla. Kadcyla is
`currently being evaluated at each stage of the breast cancer treatment paradigm.
`
`Antibody Drug Conjugates
`
`The therapeutic window of the most commonly used chemotherapies is limited due
`their toxic effects on normal, proliferating cells. The selective expression of surface-
`expressed protein antigens on malignant cells presents attractive therapeutic targets.
`The development of monoclonal antibodies (mAbs) offers the unique ability to
`selectively target tumor-specific antigens with the hope of minimizing toxic, systemic
`side effects. Antibody drug conjugates (ADCs) are a unique class of therapeutics that
`pair monoclonal antibodies with cytotoxic agents. While this design suggests the
`possibility of delivering chemotherapy specifically to tumor cells and appears
`scientifically and logically sound, it has been met with many unexpected challenges.
`
`10
`
`www.cowen.com
`
`IMMUNOGEN 2147, pg. 10
`Phigenix v. Immunogen
`IPR2014-00676
`
`

`
`Cowen and Company
`Equity Research
`
`ImmunoGen
`November 3, 2014
`
`Development Of ADCs
`
`The frequent need to combine mAbs with standard chemotherapies implies that many
`cancer protocols will continue to have significant toxicity. ADCs merge Abs with
`chemo by fusing efficacious cytotoxic chemotherapies with selective mAbs in an effort
`to enhance tumor killing efficacy and minimize the toxic side effects of broad-
`spectrum chemotherapies. An ADC is composed of three components:
`
`1. Monoclonal Antibody: Determines target antigen specificity for ADC and delivers
`payload to tumor cell.
`
`2. Toxic Payload: Cytotoxic chemotherapy.
`
`3. Linker: Fuses the mAb with the toxic payload. Once ADC is internalized by the cell
`the linker is disrupted, allowing for release of payload.
`
`For a complete overview of ADC development, please see our recent initiation report
`on Seattle Genetics.
`
`Design of T-DM1
`
`Source: ImmunoGen Presentation; SABCS 2010
`
`
`
`
`Trastuzumab Success Offers Platform For ADC Development
`
`HER2 Biology
`
`The Human Epidermal Growth Factor Receptor 2 (HER2) is a plasma membrane
`bound receptor tyrosine kinase. Despite being a growth factor receptor, HER2 has no
`known ligand and acts as the primary heterodimerization partner for other HER family
`members (HER1 (EGFR), HER3, and HER4). Upon ligand binding to HER1, 2 or 4, HER2
`will heterodimerize and undergo transphorylation. These phosphorylation sites act as
`docking sites for effectors to activate various intracellular, growth promoting and
`survival pathways. When HER2 is over-expressed it can homodimerize and thus
`become active in the absence of ligand. Over-activation of HER2 can also be caused
`by a mutated or truncated form of HER2 (p95), though this alteration occurs much less
`frequently than gene amplification. HER2 activation has been shown to stimulate a
`variety of signaling cascades including the well-recognized oncogenic
`RAS/RAF/MEK/MAPK and PI3K/AKT/mTOR pathways. The PI3K/AKT pathway has
`been shown to be the critical mediator of HER2 oncogenic activity and in fact
`mutations within the PI3K/AKT pathway have been shown to desensitize HER2+
`
`www.cowen.com
`
`11
`
`IMMUNOGEN 2147, pg. 11
`Phigenix v. Immunogen
`IPR2014-00676
`
`

`
`Cowen and Company
`Equity Research
`
`ImmunoGen
`November 3, 2014
`
`tumors to HER2-targeting therapies. Numerous inhibitors of PI3K are currently being
`explored for use in HER2+ breast cancer including Novartis’ BKM120 and BEZ235.
`
`HER2: A Driver of Breast Cancer
`
`The HER2 gene was fully sequenced in 1985 after its ability to promote cancer was
`recognized a few years prior. Shortly thereafter, numerous researchers demonstrated
`that the HER2 protein was over-expressed in approximately 20-25% of breast cancer
`patients. At the time, HER2 positivity correlated directly to the extent of lymph node
`involvement and was a valuable predictor of both overall survival and recurrence-free
`survival, as HER2+ cancers had both shorter times to recurrence and shorter overall
`survival times. HER2 also appeared to be a better prognostic indicator than other
`factors used at the time including size of the primary tumor, disease stage, ER/PR
`status and lymph node involvement.
`
`It had previously been reported that a murine anti-HER2 mAb effectively inhibited the
`growth of HER2-amplified tumor cells, but its therapeutic use was limited due to the
`immunogenic response against murine-derived mAbs. In 1992, Genentech reported
`the development of a recombinant humanized HER2-targeting mAb (trastuzumab)
`that blocked growth of HER2-expressing breast cancer cells. The mAb also elicited
`antibody-dependent cellular cytotoxicity (ADCC) against the tumor cells while sparing
`normal cells that did not express HER2 at elevated levels. Further work demonstrated
`that trastuzumab has multiple mechanisms of action against HER2-expressing tumor
`cells. It can promote HER2 degradation, inhibit cell growth pathways, activate cell
`cycle arrest programs and mediate the aforementioned ADCC.
`
`Trastuzumab Development Leads To Improved Clinical Outcome
`
`Trastuzumab was approved in 1998 for use in women with HER2+ metastatic breast
`cancer following a successful Phase III trial. The which were initially presented at
`ASCO in 1998 and later published in the NEJM in 2001 (Slamon et al., (2001) NEJM).
`The Phase III trial enrolled 469 patients with HER2+ breast cancer who had not
`previously received chemotherapy. Patients received either anthracycline +
`cyclophosphamide or paclitaxel with or without trastuzumab until disease progression.
`The median time to progression for patients receiving chemo + trastuzumab was 7.4
`months vs. 4.6 months for those who received chemo only (p<0.001). Combination
`treated patients also exhibited improved overall response rates (50% vs. 32%,
`p<0.001), duration of response (median, 9.1 months vs. 6.1 months, p<0.001) and time
`to treatment failure (median, 6.9 months vs. 4.5 months, p<0.001). Improvement in
`overall survival was also observed, despite the fact that upon progression all patients
`were allowed to enter an open-label study of trastuzumab alone or in combination
`with other therapies. The reported median overall survival for combination treated
`patients was 25.1 months vs. 20.3 months for chemo-only patients (p=0.046).
`Importantly, trastuzumab appeared to be of greater benefit to patients with the highest
`levels of HER2 expression. Since its initial approval in 1st-line HER2+ metastatic breast
`cancer in combination with paclitaxel or as monotherapy for patients who have
`received one prior chemotherapy in the metastatic setting, trastuzumab is now
`approved for the adjuvant treatment of HER2+ breast cancer in combination with
`chemotherapy or as a monotherapy following anthracycline-based therapy.
`
`Recurrence Following Trastuzumab
`
`Recent data has suggested that progression following treatment with trastuzumab
`does not indicate that a tumor has become resistant, but in fact may continue to
`benefit from HER2-targeting therapy. Patients who received trastuzumab or lapatinib
`in combination with chemotherapy following 2nd-line progression fared better than
`
`12
`
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`
`IMMUNOGEN 2147, pg. 12
`Phigenix v. Immunogen
`IPR2014-00676
`
`

`
`Cowen and Company
`Equity Research
`
`ImmunoGen
`November 3, 2014
`
`those who did not receive anti-HER2 therapy in the 3rd-line setting. This finding
`validates the general practice of continuing anti-HER2 therapy through progression
`and that HER2 remains a valid target throughout the breast cancer treatment
`paradigm.
`
`For ADC Development, Half The Battles Over
`
`One of the largest hurdles in the development of a successful ADC is antigen
`selection, coupled with the generation of a highly efficacious mAb. The success of
`trastuzumab offered an ideal platform for payload conjugation. Furthermore, the vast
`difference in HER2 expression levels between HER2+ tumors and normal cells (~2M
`copies on the cell surface, 40-100 fold more than normal cells) presents the
`opportunity to limit toxic side effects. ImmunoGen has taken the modular approach
`used in T-DM1 development and applied it to some of their own pipeline candidates.
`For example, IMGN529 development was initiated by first generating a mAb with high
`affinity and specificity for its target, which on its own is capable of mediating tumor
`cell killing.
`
`T-DM1 Development
`
`The development of T-DM1 was prompted by the finding of enhanced anti-tumor
`efficacy in trastuzumab combination with anti-microtubule chemotherapies. Initially,
`several mAb-DM1 conjugates were constructed to determine linker optimization
`including disulfide and thioether linked conjugates a