We have maintained a Neutral rating on Micromet, Inc. (MITI) with a target price of $7.00 per share following appraisal of third quarter 2011 results.
Micromet’s 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. 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. We believe that investor focus currently is more on the development of lead candidate blinatumomab rather than the earnings report.
We believe blinatumomab holds tremendous potential in the treatment of acute lymphoblastic leukemia (ALL). Blinatumomub is one of the leading BiTE antibodies. These represent a new class that activate the T-cells of a patient’s immune system to eliminate cancer cells.
The company is conducting a pivotal study of blinatumomab (MT103) in Europe in adults with minimal residual disease (MRD) positive B-precursor ALL, also referred to as front-line ALL. The company also has a mid-stage study (n=20) of blinatumomab underway in adults suffering from relapsed or refractory B-precursor ALL. Micromet has presented encouraging data from both trials. We believe the successful development and commercialization of blinatumomab hold tremendous promise for Micromet as a huge clinical need exists in both high-risk front-line ALL patients and in victims with relapsed refractory ALL. Updated data presentation from the mid-stage study (n=20) of blinatumomab in relapsed or refractory B-precursor ALL at the American Society of Hematology (ASH) meeting in December 2011 represents a major near-term catalyst for Micromet.
In addition, the US Food & Drug Administration (FDA) has advised Micromet to conduct two additional trials in B-precursor relapsed refractory ALL patients which could enable filing for an accelerated approval of blinatumomab.
Besides ALL, blinatumomab has potential in a variety of other blood cancers which represent a multi-billion dollar opportunity. It is being studied for the treatment of patients with non-Hodgkin’s lymphoma (NHL) and a number of different NHL subtypes like mantle cell lymphoma (MCL) and diffuse large B-cell lymphoma (DLBCL).
Other than blinatumomab, Micromet has another wholly owned BiTE antibody, MT110, under phase I trials in patients with local advanced, recurrent, or metastatic solid tumors of epithelial origin. Moreover Micromet has entered into contracts with pharma giants like Bayer (BAYRY), AstraZeneca, Sanofi-Aventis (SNY) and Amgen (AMGN), which are focused on developing BiTE antibodies against disclosed/undisclosed solid tumor targets. Such alliances provide an important source of funding for Micromet and 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. Although no treatment options targeting CD19 (a protein highly expressed in cancer cells targeted by blinatumomab) are currently available commercially, many companies have pipeline candidates for the indication. We therefore prefer to remain on the sidelines.
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