Inside Wall Street: Why Micromet Is a Small Biotech With Big Potential

Major pharmaceutical companies aren't usually quick to form partnerships with small biotechs, unless the big guys see a promise of getting their hands on attractive new drug candidates. Well, little-known biopharmaceutical outfit Micromet (MITI) has attracted not just one but seven Big Pharmas that have signed partnership pacts to help develop some of its products. Micromet's No. 1 appeal: It's developing novel antibody-based drugs to treat cancer, inflammatory and autoimmune diseases.

Specifically, Micromet has developed a new class of drugs called "BiTE" antibodies that mobilize T-cells, the body's most potent killer cells, enabling them to seek and destroy normally unrecognizable cancer cells. The main job of T-cells is to guard the body against infection. But cancer cells tend to develop ways to escape notice by T-cells. Micromet's chief product is called blinatumomab, which will soon undergo a pivotal clinical trial in patients with acute lymphoblastic leukemia, a rare and deadly blood cancer.

Catching Big Pharma's eye are the results from a Phase II study of blinatumomab earlier this year, which indicated that 80% of acute lymphoblastic leukemia patients had no detectable tumor cells left after treatment with the drug. Existing approaches being used to treat the disease have been ineffective, according to some analysts. The average five-year survival rate for patients who are resistant to the standard chemotherapy is about 7%.

Finally, Some Advances

Over the past 18 months, Micromet has formed collaborations with a number of large pharmaceuticals to develop new BiTE antibodies. They include Sanofi-Aventis (SNY), which partnered with Micromet in October 2009; Boehringer Ingelheim, which signed up in May 2010; and Bayer Schering, in December 2009.

Micromet's new approach to treat cancer that mobilizes the body's immune system is gaining a lot of attention, says Jennifer Neiman, Micromet's director of corporate communications. Acute lymphoblastic leukemia is a disease "where there hasn't been any improvement in patients' outcomes in decades," she adds.

A number of the major drugmakers will lose patent protection on some of their blockbuster products by 2014, notes Neiman, so they're looking to replace potentially huge losses in sales growth by transitioning into antibodies and other biologics, either through internal research-and-development efforts or through partnerships and acquisitions. Antibodies have proven to be very successful commercially in major drugs, including Rituxian and Herceptin, where antibodies were pivotal, notes Neiman.

High Risk of Early Relapse

The collaborations with major drugmakers provide the required muscle that Micromet needs to develop its drug pipeline, says Zacks Investment Research in a recent research report. Zacks has raised its recommendation on Micromet to outperform from neutral. "We are pleased with the broad pipeline of drug candidates at Micromet," wrote Zacks.

Patients with acute lymphoblastic leukemia are typically treated with complex and highly toxic chemotherapy regimens, which may be followed by bone-marrow stem-cell transplantation for eligible patients. After chemo, patients may have low numbers of residual tumor cells left in their bone marrow, a condition referred to as minimal residual disease. Such patients tend to have a very high risk of early relapse, so improved treatments represent a high medical need, notes Zacks.

At its recent annual meeting in Orlando, the American Society of Hematology, the nation's largest gathering of blood cancer experts, Micromet presented updated data that showed that 80% of patients treated with Micromet's blinatumomab had no evidence of the disease.

Attracting Big-Name Investors

"We are also impressed with the molecular response rate of 80% seen in 21 relapsed/refractory adult acute lymphoblastic leukemia patients treated with blinotumomab," says Mark Monane, senior biotech analyst at investment firm Needham. The analyst reiterated his buy recommendation on Micromet, currently trading at $7 a share, up from a 52-week low of $5.13. Monane has a 12-month price target of $13 for the stock.

Although largely unknown to individual investors, Micromet has already attracted some big institutions, including Fidelity Management, which has accumulated a stake of 13.3%; Columbia Wanger Asset Management, which owns 5.3%; and BlackRock Institutional Trust, with 4.7%.

So, for investors who are uncomfortable with investing in the arcane and risky world of biotechs, the big names that have taken large positions in Micromet should serve as reassurance that the stock may be worth looking into. After all, Micromet has attracted not only some of big institutional investors but also several global names in Big Pharma.

One potentially huge bonus in Micromet: It's an attractive takeover candidate for its current partners.

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

Add a Comment

*0 / 3000 Character Maximum