We actually hit numbers not seen in over 10 years, but I cannot fault the companies decision to take advantage of it, knocking the price down short term with an offering. The $100M+ they'll be putting in the bank should give them the financial strength to continue and expand all their clinical efforts until regular revenue starts kicking in from sales of T-DM1.
While I expect IMGN to announce $11 million in milestone payments from Roche by the time T-DM1 is approved, I have no idea of when, or how often IMGN will see royalty income from sales.
A view of the substantially redacted partnership I saw some time ago clearly showed a number of post approval milestones based on reaching certain annual sales levels would be paid, presumed with royalty increases at achieving each milestone. The question is do they wait for a year after approval, or initiation of sales to determine annual sales, then pay IMGN the appropriate royalty level, and milestones if any are due, or do they pay monthly, quarterly, etc at the current royalty level, then raise it when the next higher level is achieved.
In that you cannot see the numbers, we cannot know what the highest royalty level is, or how high sales must go before it's achieved. In that the partnership language dates back to 1990, it's very possible the top level's not nearly as high as might be put into a similar partnership today. We just might find that IMGN's getting the top royalty level, and has been paid all the milestones when annual sales exceed $1 billion, should that be the case, it may happen by the end of the first year of sales. It's my belief that within 5 years of approval T-DM1 will have replaced and expanded on Herceptin to the tune of approaching $10 billion in annual sales. If I'm correct about this, and about the royalties reaching high single digits, somewhere in the 7% to 9% range, IMGN could be bringing in well over $.5 billion, equating to over $5 a share in earnings.
What we all need to recognize is that 5 years after approval, IMGN's pipeline may be worth a large multiple of what T-DM1 alone is. Several of the drugs in the clinic appear to be getting promising results. 5 years after the initial approval we may have other approved drugs, if not, we'll no doubt have at least a few in Phase III Trials nearing approvals. Any drug that's either been developed by IMGN, or is developed under terms of any of the newer partnerships will pay IMGN substantially higher royalties, milestones, etc than T-DM1, so as big as IMGN might be on huge T-DM1 sales, it can be far larger on sales from the newer partnerships, or its own drugs being approved. Perhaps by the time IMGN's own drugs are approved, it may be able financially not to need to partner them at all, rather contracting for any services it cannot support itself.
Gary |
