Micromet Inc.’s (MITI) second quarter 2010 loss per share came in at 4 cents per share, narrower than the year-ago quarter’s loss of 27 cents. However, after adjusting for the change in fair value of warrants, the company reported a loss per share of 14 cents, less than the year-ago quarter’s post adjustment loss of 15 cents per share. The Zacks Consensus Estimate hinted at a loss of 17 cents per share.
Revenues for the reported quarter climbed approximately 32.6% year over year to $6.5 million. The Zacks Consensus Revenue Estimate for the reported quarter was $7 million. The company records revenues primarily in the form of reimbursement of expenses incurred by it under different collaborative agreements.
Operating expenses during the reported quarter increased approximately 38% year over year to $17.4 million. Research and development ($12.0 million) and general and administrative ($5.4 million) expenses increased 36.4% and 42.1%, respectively. The increase in research and development expenses was due to the development of various pipeline candidates.
Many significant developments have taken place in the recent past, the most important being the company’s collaboration agreement with Boehringer Ingelheim of Germany in May 2010 for the development of a new BiTE antibody to treat multiple myeloma.
Subsequent to the agreement, the company received an up-front payment of €5 million (approximately $6.1 million) that is being recognized over a 20-year period ending 2030. Under the terms of the agreement, Micromet will be responsible for the generation and optimization of the BiTE candidate and pre-clinical development. On the other hand, the responsibility of conducting clinical studies, manufacturing scale-up and commercialization of the product lies with the German company. The agreement makes Micromet eligible to receive about €50 million (approximately $66 million) on the achievement of certain milestones. Furthermore, Micromet will also receive royalties on global sales of the product.
We are encouraged to see Micromet’s progress on its product portfolio. However, we remain concerned since the pipeline is yet to deliver. The company is heavily dependent on blinatumomab – any hiccup in its clinical development programs will weigh heavily on the stock.
Our Recommendation
Micromet is a Zacks #3 Rank (‘Hold’) stock. This implies that the stock is expected to perform in line with the overall US equity market over the next 1-3 months. Our long-term Neutral stance on Micromet indicates that the stock is expected to replicate its short-term performance, but over 6+ months. Consequently, we advise investors to retain the stock over the time period.
The lack of estimate revisions by the analysts following Micromet indicates the absence of a clear directional pressure on the stock. This supports our short-term and long-term stance on the stock.
