(MITI) Micromet Loss Less Than Analyst Estimates – Revenues Rise

Micromet Inc.’s (MITI) second quarter 2011 loss per share came in at 19 cents (after adjusting for the change in fair value of warrants), wider than the year-ago loss of 15 cents per share (also adjusting for the change in fair value of warrants). The loss was, however, narrower than the Zacks Consensus Estimate of a loss of 21 cents due to higher-than-expected revenues. Loss widened from the prior year due to higher operating expenses which more than offset the rise in revenues.

Quarterly Details

Revenues at Micromet were up 7.8% to $7.1 million in the second quarter of 2011 on the back of higher collaboration revenue. Revenues were also above the Zacks Consensus Estimate of $6 million.

Operating expenses during the reported quarter climbed approximately 56% over the prior-year period to $27.1 million. Both research and development (up 63% year over year) and selling, general and administrative (up 40%) expenses increased in the quarter. Higher R&D expenses resulted from a ramp in blinatumomab studies.

Pipeline Update

Micromet’s lead pipeline candidate is blinatumomab, which is being studied for the treatment of acute lymphoblastic leukemia (ALL) and non-Hodgkin’s lymphoma (NHL). 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. Micromet has entered into contracts with many pharma giants like Bayer (BAYRY), AstraZeneca (AZN), Sanofi Aventis (SNY), which are focused on developing BiTE antibodies against undisclosed solid tumor targets.

In June this year Micromet presented interim data from a mid-stage trial, which showed that blinatumomab produced a high complete remission rate in patients suffering from relapsed ALL. The data was presented at the European Hematology Association (EHA). The data showed that out of the 12 evaluable patients in the study who had relapsed following standard therapy, 75% (9) achieved the primary endpoint of complete remission (CR) or CR with partial recovery of blood counts (CRh). Moreover, there was no evidence of remaining leukemic cells in blood or bone marrow of these 9 patients. Updated data from the trial is expected at the American Society of Hematology (ASH) meeting in December this year.

In July Micromet signed a collaboration agreement with yet another pharma giant Amgen (AMGN) under which it will develop BiTE antibodies against three undisclosed solid tumor targets. Per the terms of the deal, Micromet will be responsible for the discovery and pre clinical development of the BiTE antibodies. Once Micromet is successful in developing products targeting solid tumors, Amgen reserves the right to pursue development, manufacturing, and commercialization of BiTE antibodies against upto two of the three targets.

Our Recommendation

Currently, we have a Neutral stance on Micromet. The stock carries a Zacks #3 Rank (short-term Hold recommendation).

We believe blinatumomab holds tremendous potential in the treatment of ALL. We are pleased with Micromet’s re-acquisition of its blinatumomab rights from MedImmune, a wholly owned subsidiary of AstraZeneca, which will enable the company to re-license the drug at more attractive terms. 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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