Micromet Misses Estimates

Micromet’s (MITI - Analyst Report) third-quarter loss per share came in at 22 cents, well below the Zacks Consensus Estimate of 14 cents and a loss of 15 cents in the prior-year period. The company reported revenues of $4 million, compared to $7 million in the third quarter of 2008. Micromet records revenues primarily in the form of reimbursements of expenses incurred by the company under different collaborative agreements. We believe current investor focus is more on the developments of the company’s portfolio rather than the financials.

Operating expenses during the quarter increased 28% year over year to $17.13 million, primarily due to a 34% rise in R&D expenses. The increase in R&D expenses was driven by Micromet assuming full responsibility of the development of its lead candidate blinatumomab as per the company’s agreement with MedImmune.

As a reminder, earlier this month, Micromet had agreed to buy out MedImmune's option to reacquire the right to commercialize blinatumomab in North America, and to terminate the collaboration agreement signed in 2003 under which MedImmune had been granted the right to develop and commercialize blinatumomab in North America. Following this agreement, Micromet now controls global rights to develop and commercialize blinatumomab.

Cash and cash equivalents at the end of the reported quarter were $100 million, up from $46 million at the end of December 2008. During the quarter, Micromet received net proceeds of about $75 million by offering $80.5 million in common stock. We believe with the advancement of clinical trial trials, the company’s R&D costs are expected to rise further, hence the need to raise funds.

There were many significant developments during the quarter. Micromet received Orphan Drug Designation from the European Medicines Agency (EMEA) for blinatumomab (MT103), currently in phase II clinical trial meant for the treatment of acute lymphoblastic leukemia (ALL). Additionally, in September, the company reported positive interim data from the phase I dose escalation clinical trial of MT110 for the treatment of patients with solid tumors. Both candidates are being developed under the company’s proprietary BiTE antibody platform. 
 
We are pleased with Micromet’s collaboration agreement with Sanofi-Aventis (SNY - Analyst Report) to develop a BiTE antibody against an undisclosed solid tumor target. As per the deal, Micromet will be responsible for the discovery, research and development of the antibody through the completion of phase 1 clinical trials, after which Sanofi-Aventis will assume full responsibility for further development and commercialization process.  Micromet received an initial payment of €8 million (approximately $12 million). In addition, the company is eligible to receive potential milestone payments of up to €162 million (approximately $241 million) and sales and royalties payments on commercialization of the drug.

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