5 Best Small-Cap Biotech Stocks with Massive Potential According to Hedge Funds

3. ImmunoGen, Inc. (NASDAQ:IMGN)

Number of Hedge Fund Shareholders: 42

There was an even more dramatic leap in hedge fund ownership of ImmunoGen, Inc. (NASDAQ:IMGN) during Q2 than there was in DICE Therapeutics. The number of funds long IMGN doubled during the quarter to easily reach a new all-time high. Jeremy Green’s Redmile Group owns over 17.7 million ImmunoGen shares as of June 30.

ImmunoGen, Inc. (NASDAQ:IMGN)’s ovarian cancer treatment ELAHERE has shown promising results, achieving the primary endpoint in a recent trial. The company will release full data from the phase 3 trial next year and believes ELAHERE will hit an objective response rate of at least 48%. That could make it the current standard of care in FRα-positive, platinum-resistant ovarian cancer.

Analysts and hedge funds are divided over the drug’s sales potential however. The ClearBridge Multi Cap Growth Strategy thinks ELAHERE amounts to a “relatively modest opportunity” (more on that below), while others believe it has blockbuster potential. JP Morgan upgraded ImmunoGen to ‘Overweight’ from ‘Neutral’ in September, noting ELAHERE’s solid growth trajectory following its U.S launch. The firm has a $22 price target on IMGN.

The ClearBridge Multi Cap Growth Strategy sold off ImmunoGen, Inc. (NASDAQ:IMGN) in Q4 of last year, citing the company’s long road to profitability, which the fund discussed in its Q4 2022 investor letter:

“During the quarter we exited a position in ImmunoGen, Inc. (NASDAQ:IMGN), a biotechnology company developing antibody-drug conjugate therapies to treat cancer. ImmunoGen received FDA approval for Elahere for ovarian cancer, however it is a relatively modest opportunity and the company still faces a long road to reach meaningful profitability. The sale is also part of our effort to consolidate the portfolio in our highest conviction ideas.”