ImmunoGen, Inc. (NASDAQ:IMGN)

I didn't have time to write about ImmunoGen when I picked it to underperform at the end of October, but Seeking Alpha has given me plenty of motivation to write about it now. I was right about the pick when the stock dropped precipitously ahead of the US presidential election, wrong after Trump won and the biotech sector roared back, right again in December, and now way wrong subsequent to the publication of the Seeking Alpha article on December 29.

The main premise of this entirely awful and empty article is that beaten down stocks get beaten down further in December due to tax loss selling and roar back in January due to the end of selling pressure and short covering. In reality, if any such rules were true then they would be immediately neutralized by traders playing the predictable pattern. One only has to look back a year to see the exact opposite occurring, where a weak end of 2015 was followed by an absolutely disastrous January and February 2016 for small cap biotech. The cited pattern simply doesn't exist.

The Seeking Alpha article claims that ImmunoGen is "neglected", but anyone who has followed developmental biotech for the last few years know that this statement is patently untrue. ImmunoGen has been a heavily followed and oft-hyped stock for many years, topping out close to 20 in mid 2015 based on optimism for their Roche-partnered ADC Kadcyla. Unfortunately, Kadcyla never sold as well as hoped and follow-on indications failed, so that it became clear that Kadcyla royalty revenues would never make ImmunoGen profitable. ImmunoGen has had to go back to the drawing board with antifolate mAb mirvetuximab for ovarian cancer, with a resultant huge increase in their quarterly burn. The real reason that ImmunoGen has lost 90% of its market cap isn't that the company is "neglected" or "overlooked" or "misunderstood". It is because the investment thesis that took the stock to 20 didn't pan out and the company is back to being a developmental biotech that is rapidly running out of a cash runway and has 100M in debt on its books.

The article rosily describes a cash position of 196M without mentioning that this number refers to the end of September, despite the article being written a full quarter later. The article also never mentions that the burn has been over 40M in recent quarters. Because the next quarterly numbers won't be issued until the annual report comes out in late February or early March, that gives traders an extra month to ignore reality and bid ImmunoGen up before the one-two punch of cash burns come then and in early May. Will mirvetuximab be ImmunoGen's salvation? Phase III data for ovarian cancer isn't expected until 2019. There may be some earlier stage data from combination trials in 2017, but this is of questionable significance. Endocyte also had an antifolate in phase III for ovarian cancer. How'd that work out for them?

Of course, the Seeking Alpha article doesn't address the scientific aspects of mirevetuximab at all. The author is content to rely on his thesis of December decline, January gain for a beaten down stock. Does the recent huge gain validate his thesis? Of course not. The upward trajectory began at the end of December, immediately after his article was published. This has nothing to do with tax loss selling or short covering and everything to do with momentum trading and algos. The only question is if the gains hold until the next earnings statement or if the momos bank their gains more quickly.

this will take off soon!