Micromet: Taking a BiTE out of cancer
Innovation is at the heart of Micromet, Inc.’s (Nasdaq:MITI) business.
The Bethesda, Md.-based biopharmaceutical firm develops antibodies for the treatment of cancer, inflammation and autoimmune diseases, and has an origin that dates back to the merger of two biotech companies.
Micromet AG was founded in 1993 as a spin-off from the Institute for Immunology at Munich University in Germany. In 2006, Micromet AG merged with CancerVax Corporation to form the present-day Micromet, Inc. CancerVax had previously incorporated in 1998 before going public in 2003.
Micromet’s success hinges on its BiTE antibody technology platform, which is designed to direct the body’s cell-destroying T cells against tumor cells. Early studies have indicated that BiTE antibodies may provide a superior mechanism for destroying tumor cells when compared to conventional antibodies. The company maintains that BiTE antibodies direct T cells to attack larger tumor masses with a potency that is comparable, or may even exceed, that of chemotherapies.
Micromet does not yet have any drugs on the market in the United States, but it is developing an impressive pipeline of therapies that are in early to mid-stage clinical trials. Its leading drug candidate, MT103, is currently in phase 2 clinical trials, and is being developed to combat non-Hodgkin’s lymphoma and acute lymphoblastic leukemia. In November, shares of Micromet got a boost when two studies showed that BiTE antibodies activate T cells only when cancer cells are present.
Micromet has several other therapies in its pipeline including Adecatumumab and MT110, which are potential therapies for solid tumors such as breast cancer. The company has taken an approach of collaborating with other biopharmaceutical and pharmaceutical companies in an effort to ultimately bring these drug candidates to market.
In 2006 and 2007, Micromet was able to generate $25.4 million and $17.4 million, respectively, in collaborative R&D revenue from work with other biopharmaceutical firms. In 2003, Micromet entered into a collaboration and license agreement with MedImmune to jointly develop MT103. Last year, MedImmune was acquired by the pharmaceutical giant AstraZeneca Plc (NYSE:AZN).
Under the terms of the agreement, MedImmune obtained a license for MT103 in North America while Micromet retained rights to MT103 outside of North America. MedImmune will make milestone payments to Micromet along the way and will also pay royalties to Micromet on sales of MT103 in North America.
Despite an average daily trading volume of just over 100,000 shares, Micromet’s emergence has been gaining the attention of analysts and investors alike. The company’s stock closed at $4.14 on Wednesday— 80% above what shares of Micromet were trading at a year ago.
In a July 10 research note, Jason Kantor, an analyst for RBC Capital Markets, set a price target of $4.50 on Micromet. “Micromet's lead drug and core technology have shown remarkable activity in treating refractory NHL,” he wrote. “Despite a significant run in MITI shares, the company has a market capitalization of only $128M and an enterprise value of $105M. Our new $4.50 price target is 23 times our 2014 EPS estimate, discounted at 35%.”
As with any up and coming biotech company that has yet to bring a drug to market, potential investors should carefully consider the risks associated with such an investment. The company’s cash position should be kept in mind. In 2007, its net cash used in operating activities was $14.3 million. On March 31, it had $27.7 million in cash and cash equivalents on hand. Additional funding could become an issue at some point in the future, but the company has developed strong partnerships with other drug companies such as AstraZeneca that have a vested interest in seeing Micromet’s pipeline succeed.
Another issue for investors to keep in mind is the potential for volatility in the stock prices of biopharma companies, such as Micromet, that only have drugs in the developmental phase. A negative outcome in any of its clinical trials could lead to major swings in the company’s stock price. A recent example of such a swing occurred in the stock prince of Vanda Pharmaceuticals, Inc. (Nasdaq:VNDA). Last week, the company’s stock lost three-quarters of its value when the FDA issued a non-approvable letter for Vanda’s experimental schizophrenia treatment.
If Micromet should prove successful in navigating the FDA approval process and overcoming these related obstacles, the payoff be huge. Given the promising results that have been exhibited by MT103 thus far, this stock might be worth a shot for investors who have a penchant for higher levels of risk.
About the Author
Billy Fisher is a certified public accountant and and freelance investment writer whose work has appeared in Investor's Business Daily and The Motley Fool.
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