Micromet Balances Risk And Reward

| About: Micromet, Inc. (MITI)
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We have maintained a Neutral rating on Micromet, Inc. (MITI) with a target price of $5.00 per share.

We believe Micromet’s lead pipeline candidate, blinatumomab, holds tremendous potential in the treatment of acute lymphoblastic leukemia (ALL). 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.

The company is conducting a pivotal study of blinatumomab (MT103) in Europe in adults with minimal residual disease (MRD) positive B-precursorALL, 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 holds 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.

Apart from 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 chronic lymphocytic leukemia (CLL).

We are also pleased with Micromet’s re-acquisition of its blinatumomab rights from AstraZeneca (AZN), which will enable the company to re-license the drug at more attractive terms provided the clinical results continue to be encouraging.

Besides 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.PK), 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 on cancer cells targeted by blinatumomab) are currently available commercially, many companies have pipeline candidates targeting the indication.

We are also concerned about Micromet’s early-stage pipeline. We therefore prefer to remain on the sidelines.