Micromet Inc.’s (MITI) third quarter 2011 loss per share came in at 21 cents (after adjusting for the change in fair value of warrants), wider than the year-ago loss of 13 cents per share (also adjusting for the change in fair value of warrants). Lower-than-expected revenues led to the wider loss in the quarter. The loss was, however, a cent narrower than the Zacks Consensus Estimate of a loss of 22 cents.
Quarterly Details
Revenues at Micromet were down almost 33% from the prior-year period to $4.5 million in the third quarter of 2011 due to lower collaboration revenue. Moreover, revenues in the year-ago quarter were boosted by the presence of a milestone payment from AstraZeneca (AZN). Revenues were also much below the Zacks Consensus Estimate of $8 million.
Operating expenses during the reported quarter climbed approximately 56.6% over the prior-year period to $25.2 million. Both research and development (up 70.2% year over year) and selling, general and administrative (up 23%) expenses increased in the quarter. Higher R&D expenses resulted from a ramp in blinatumomab studies.
Pipeline Update
Micromet’s lead pipeline candidate, blinatumomab, is being studied for the treatment of acute lymphoblastic leukemia (ALL) and non-Hodgkin’s lymphoma (NHL). The company is developing the candidate on its own. Blinatumomub is one of the leading BiTE antibodies. BiTE antibodies represent a new class of antibodies that activate the T-cells of a patient’s immune system to eliminate cancer cells.
Currently Micromet is conducting a mid-stage study (n=20) of blinatumomab in adults suffering from relapsed or refractory B-precursor ALL. This study is evaluating the efficacy, safety and tolerability of blinatumomab in patients who do not respond to standard chemotherapy. Updated data from the trial is expected at the American Society of Hematology (ASH) meeting in December 2011. The company will use data from this study to design a pivotal trial expected to start in the fourth quarter of 2011, which will form the basis of the global registration of blinatumomab for this indication.
At the third quarter conference call, management announced that it has received input from the US Food & Drug Administration (FDA) to conduct two additional trials which will form the basis of Biologics License Application of blinatumomab for full approval. These trials include a mid-stage trial in adult patients with B-precursor relapsed refractory ALL who had an initial remission of short duration, those in second or later relapse, and those who are refractory to front-line therapy. This trial is expected to complete enrollment in the fourth quarter of 2012 and report preliminary data in 2013. The second trial will be a late-stage study designed to evaluate the safety and efficacy of blinatumomab versus chemotherapy in adult patients with relapsed refractory B precursor ALL.
In July Micromet signed a collaboration agreement with pharma giant Amgen Inc. (AMGN) for the research of BiTE antibodies against three undisclosed solid tumor targets. Once Micromet is successful in developing products targeting solid tumors, Amgen reserves the right to pursue development, manufacturing, and commercialization of BiTE antibodies against up to two of the three targets. Other than Amgen, Micromet has contracts with many other pharma giants like Bayer (BAYRY), AstraZeneca, and Sanofi Aventis (SNY), which are focused on developing BiTE antibodies against undisclosed solid tumor targets. Such alliances provide an important source of funding.
Our Recommendation
Currently, we have a Neutral stance on Micromet. The stock carries a Zacks #3 Rank (short-term Hold recommendation).
We believe that investor focus will be more on the development of lead candidate blinatumomab rather than the earnings report. Blinatumomab holds tremendous potential in the treatment of ALL. We believe Micromet’s partnerships with large pharma and biotech companies could generate substantial future royalty revenues for the company. However, we believe that Micromet requires the strength of a large established player to accelerate blinatumomab’s development in order to gain a head-start over potential competitors on approval. We are also concerned about its early stage pipeline. Accordingly, we prefer to remain on the sidelines.
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