The Clock is Ticking on Micromet

Earlier this month, Micromet (MITI) concluded an impressive public offering of $75M, approximately 20% of the company’s market cap. The offering illustrates the transformation the company has undergone from an anonymous biotech play into a recognized industry leader. This is also echoed by the growing attention from Wall St. When I first wrote about Micromet in 2007, the company was covered by a single analyst, RBC’s Jason Kantor, who was one of the first to see the potential in Micromet’s platform. Today the stock is covered by six additional research analysts.  

According to the company, its strengthened cash position will provide at least two years of operations, assuming no additional funds are received. Most of the budget will probably be related to Micromet’s lead agent, blinatumomab, which is expected to enter a pivotal trial in Acute Lymphoblastic Leukemia (ALL) in the first half of 2010.

With almost $125M in its coffers, Micromet has just enough money for completing and generating data from the pivotal trial. Nevertheless, some of the money should be put to another use – getting the US rights for blinatumomab back from Medimmune (AZN). As discussed in a previous article, Micromet is trapped in a delicate situation where Medimmune is unwilling to develop the drug, nor is it willing to return the US rights for the drug. Prior to the offering, Micromet could not afford buying back Medimmune’s stake, but now, it can do so without jeopardizing its financial stability. Such a move will be an important value creation event for Micromet, who will finally be able to relicense blinatumomab at terms that are more attractive than those of the original deal with Medimmune. More importantly, such a deal will facilitate the broad global development program this promising drug deserves.

ALL is a niche indication which represents a fast and cheap route to market, so theoretically, Micromet could commercialize the drug in ALL on its own. However, blinatumomab has potential in a variety of other blood cancers, which represent a multibillion dollar opportunity. In order to capture a meaningful market share in these indications, primarily Non-Hodgkin’s Lymphoma (NHL), Micromet must have the muscle of a large partner on its side. With a large partner, Micromet will be able to accelerate blinatumumab’s clinical development that seems more crucial today than ever, as direct competitors are beginning to surface. 

The competitive landscape

Blinatumomab targets a protein called CD19, which is highly expressed on cancer cells. When Micromet presented first clinical data for this agent in the summer of 2006, it was the first CD19 antibody to show activity in cancer patients. To date, this status has not changed, but by year end there could be additional CD19 antibodies with clinical proof of concept.

Sanofi-Aventis’ (SNY) SAR3419 is the second most advanced CD19 antibody in development, making it an obvious threat to Micromet’s blinatumomab. SAR3419 is an antibody drug conjugate that was licensed from Immunogen (IMGN) in 2003. The drug entered the clinic in late 2007 and is currently being evaluated in three phase I trials, either as a weekly or every three weeks treatment. Although no data has been published from the studies, there is good reason to believe the drug is active.

The first indication for that was the 2008 agreement Sanofi signed with Korea based Celltrion for the production of SAR3419. One can assume that Sanofi would not go through this outsourcing process unless it had plans to advance SAR3419 further. Another positive indication is the launch of the weekly trial, approximately one year after the start of the every three weeks trial. This pattern is similar to what has been seen with other ADCs in the clinic, such as Seattle Genetics’ SGN-35 and Genentech’s T-DM1, implying yet again that Sanofi was happy with what it was seeing in the first study. Lastly, there is a constant buzz around SAR3419, following some formal and informal comments by Sanofi and Immunogen. The most recent of which was made by Immunogen’s CEO, Dan Junius, who said he is “sensing an excitement” at Sanofi around SAR3419. Sanofi is expected to present results from the every three weeks trials at ASH this December.

Another drug that will also have data at this year’s ASH is MDX-1342, which is being developed by Medarex [soon to become part of BMS (BMY)]. MDX-1342 is a CD19 antibody with improved capability to stimulate an immune response against cancer cells. Medarex chose to study this antibody in cancer as well as autoimmune diseases. At ASH, it will probably report data from the oncology trial.

Therefore, at ASH, there will be data for three CD19 antibodies in several indications. Although all three bind CD19, each represents a different class of antibodies with a different mechanism of action. Blinatumomab is a BiTE antibody, SAR3419 is an ADC and MDX-1342 is a non-fucosylated antibody. This will be the first opportunity to evaluate the three different approaches for the same target, although the three agents will not be compared head to head and the results will be from small uncontrolled studies.

In terms of efficacy, it is highly unlikely that any of the two competitors show comparable efficacy to that of blinatumomab, which had a response rate of 92% in a small cohort of patients (12 patients at the highest dose level). SAR3419, which is based on Immunogen’s proven technology, has better chances to come close to blinatumomab. In contrast, the technology Medarex uses is still unvalidated. Earlier this year, Medarex published results for a similar antibody, MDX-1401, which targets CD30. As previously mentioned here, the results were inferior to what Seattle Genetics (SGEN) demonstrated using its ADC technology for the same target. 

On top of the difference in clinical activity, each of the three will probably have a different product profile, which is where blinatumomab might face some challenges.

Blinatumomab’s main weakness lies in its mode of administration, as the drug has to be continuously infused for at least a month. Although Micromet reported no compliance or technical issues related to this administration mode, patients and physicians prefer drugs that are injected less frequently, every several weeks or so. MDX-1342 may be more suitable for autoimmune indications because of a longer bloodstream circulation time, thus potentially enabling a less frequent dosing schedule. Micromet also encountered some safety issues with blinatumomab, especially CNS toxicities (confusion, disorientation etc.), which might limit the drug’s use. According to the company, it found a method to work around these issues, which will be presented at ASH. In addition, as blinatumomab is a novel type of antibody, there is always the risk that larger trials will reveal new side effects. Lastly, SAR3419 or MDX-1342 can be given to patients until progression, as opposed to blinatumomab, which is given for 4-8 consecutive weeks. This probably diminishes blinatumomab’s ability to maintain clinical responses in comparison to what it could have achieved.

There are currently additional antibodies against CD19 that will enter the clinic in the near future, thus making the field even more competitive. Newcomers include Seattle Genetics’ ADC, SGN-19A and Xencor’s XmAb5574.


Accelerating development

Micromet must not count on the superb activity blinatumomab has achieved so far. First and foremost, the response rate in larger trials will probably be lower than the staggering 92% it achieved in the phase I study. In addition, physicians will start using whatever reaches the market first, even when there are more promising drugs in development. Therefore, if blinatumomab is the second or third CD19 antibody to get approved for NHL, market penetration will be more difficult.

In terms of number of patients treated, Micromet has already lost the lead in NHL to Sanofi, who will probably have ~100 patients enrolled by year end. A company like Sanofi can support fast enrollment  due to its financial resources and large footprint. Indeed, it seems like SAR3419 is receiving a high priority at Sanofi.

It is clear that Sanofi has become very active in oncology drug development, based on the latest shopping spree that included the BiPar acquisition and the huge licensing deal with Exelixis (EXEL).  Sanofi’s main oncology assets, Eloxatin and Taxotere are coming off patent, so there is a lot of pressure on the company to bring new drugs to market as quickly as possible. If SAR3419 demonstrates good activity, Sanofi will surely pursue this opportunity aggressively. It could launch a battery of large trials in the different subtypes of NHL, before Micromet could even conclude its phase I NHL study.

Potential Catalysts

Micromet has three potential value creation events in the coming six months.

First will be the reacquisition of blinatumomab’s US rights in the coming months, which should have a positive effect on the stock price.  

The second important event will be data presentation for MT110, a new BiTE antibody currently in a phase I dose escalation trial in solid tumors. Results will be announced at the ECCO meeting next month, where the company will present results in 15-20 patients with solid tumors. Given the very low starting dose, it is unlikely to see pronounced tumor shrinkage, thereby diverting most of the attention to the drug’s safety profile. Assuming a trial design similar to blinatumomab’s phase I study, Micromet reached a dose of 15µg/m2 per day. In the blinatumomab trial, there were clear signs of activity at this dose level, but MT110 will have to be further dose-escalated since solid tumors typically require higher doses relatively to blood cancers. Therefore, MT110 must demonstrate a clean safety profile at these sub-therapeutic doses in order to enable Micromet reach the relevant doses. Any clinical activity observed in the study, especially among patients at the higher doses, will be regarded as extremely positive.  

The third event will be an update from the ALL and NHL trials at ASH in December. Investors would like to see additional responses as well as response durability in both studies. Assuming the results are consistent with what the company previously reported, Micromet should build on these results to partner the drug. Of note, Micromet has access to the data, so it could share them with potential partners and strike a deal even prior to ASH.

On top of the obvious risks associated with early stage drug development, Micromet’s shares might be affected by the SAR3419 results Sanofi presents at ASH. Owning Immunogen as a hedge against this event could be an option for Micromet investors. In fact, owning Immunogen going into the fourth quarter of 2009 irrespective of SAR3419 is not a bad idea, as will be discussed in the next article.

Portfolio Updates and performance

Since inception more than ten months ago, the biotech portfolio, managed by Ran Nussbaum and myself, had a return of 53.5%. This compares with favorably with the broader indices as well as the leading healthcare indices. So far, the leading index is the AMEX Biotechnology index, which achieved a return of almost 37%.

We are adding NeurogesX (NGSX) and Myriad Genetics (MYGN) to the portfolio.

                                      The biotech portfolio as of Aug 23rd 2009    




72 thoughts on “The Clock is Ticking on Micromet

  1. Shelly – It’s hard for me to speculate on this issue. Too many unknowns.
    sam – ALTH’s data is not spectacular but the lack of other alternatives makes it very hard for regulators to turn it down, especially given the fact the trial was under SPA. I would say it has 80% likelihood of approval
    alex – Yes, I still like ARRY because they are very diversified and has at least 2 drugs with initial POC being developed in the hands of partners.



  2. Nice to hear from you again, Ohad.

    Do you believe alth stock price will go higher after approval or is approval already baked in the stock price?

    Would you suggest that we buy before or after approval?


  3. Given the recent stock brhaviour, anything is possible, but I still think there is value in getting a drug approved for a small indication which represents a highly unmet medical need. In other words – yes.


  4. Good answer on not speculating on a takeover price. I’m in no hurry and would rather see the company show progress on its candidates so that the price will already be alot higher when an offer is made (assuming they continue to be successful in their testing results). To this end it might not be such a bad thing if they don’t get to buy back MT103 NA rights back from AZN. If that is keeping MITI from being attrative as a takeover, better to have them continue to go it alone and (hopefully) achieve greater successes with BiTE candidates. If BiTE has teeth, the party hasn’t even started.


  5. hi ohad,

    I have been trying to do some research on alth (some could have been biased) and it appears the consensus is that they expect pdx to be approved and at worst just delayed. Moreover, large put spread have been bought/sold (not sure) on alth ahead of decision. I wish i could tell which because I remember there were a large purchase of put spreads on snta before it tanked.

    Thus, consensus of approval (perhaps may limit the initial upside and shares would tank just on any delay…makes it feel risky. (Snta is different, I know).

    Do you think it is better to put new money in incyte or allos?


  6. heymang,

    Results are in line with what most people expected. The good safety profile implies that they might be able to dose escalate MT110 to the clinically active doses, but it’s too early to tell.



  7. incyte is selling 18 millions shares at a price of 6.75 per share which was below the price it was trading for before the announcement.
    Is this a positive for incyte where it will help fund operations or is this a negative dilluting existing shareholders?


  8. Dear Ohad – I hope you can help m e. I am not an investor. My husband volunteered to participate in the Phase I study for MDX – 1342 (Medarex – now BMS) in Boston. His doctor (who was one of the principal investigators) and his participant contract assured him that all costs related to the study would be covered from the medication to travel. Just as he was due to undergo his fourth and final infusion, he began receiving bills from the hospital. He called his doctor leaving several messages. She never returned his calls. He cancelled the final infusion visit.

    He spoke with various people in the hospital billing department, from the clinical trials patient safety group, etc. protesting these charges. The hospital then billed his health insurance company. He alerted them and they ceased paying (I don’t know if they recovered any money). The hospital went after Peter again. Although he agreed to a payment plan he was contacted by a collection agency this week. This has been a real nightmare. We have contacted the state Attorney General.

    I am not web savvy but I have found that the trial was suspended apparently due to safety issues. We heard that several participants dropped due to immune suppression leading to infections. My husband contracted pneumonia during the study but persevered (unfortunately). I have failed to find any further information about he trial using clinical web sites. Since you follow these
    investigational drugs independently, I am hoping you know more.

    Do you know what happened to result in the trial’s suspension? I am also wondering if Medarex folded leaving the hospital to absorb the study costs – which it decided pass on to patients. Any information you may have would be greatly appreciated.

    Best wishes,


  9. Hi Sam,

    Of course I still follow MITI. As you saw we sold some of our holdings in MITI but we’re still bullish re the stock long term. The current price isn’t that cheap but it is very hard to predict short term movements. All in all the company is progressing nicely and it’s competitors (Sanofi/Immunogen as well as Medarex) experienced setbacks. At ASH, I found the DLBCL data 3/6 CRs very intriguing.



  10. Hi Ohad
    Thanks for the reply.
    I can’t find your latest portfolio on the website.
    Do you still publish it?
    I am visiting your website after about an year.



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