Micromet: a BiTE at cancer?

Last week, Amgen has an­nounced the com­ple­tion of the ac­qui­si­tion of Nas­daq-listed Ger­man com­pany Mi­cromet Inc., valu­ing it in the prox­im­ity of US$1.2b.

Last week, Amgen has an­nounced the com­ple­tion of the ac­qui­si­tion of Nas­daq-listed Ger­man com­pany Mi­cromet Inc., valu­ing it in the prox­im­ity of US$1.2b. With this ac­qui­si­tion, Amgen has gained a Ph3 stage mol­e­cule (bli­na­tu­momab) in de­vel­op­ment for blood tu­mours, a Ph1 mol­e­cule for solid tu­mours and the BiTE plat­form, the un­der­ly­ing in­no­v­a­tive an­ti­body tech­nol­ogy plat­form. First of all, as we ob­vi­ously bow to Chris­t­ian Itin, Pres­i­dent & CEO, and his man­age­ment team for hav­ing de­liv­ered Index Ven­tures and the other stake­hold­ers a bil­lion dol­lar exit, we es­pe­cially con­grat­u­late him and the en­tire com­pany for the real value they have cre­ated for the in­dus­try: the dis­cov­ery and de­vel­op­ment of a new break­through ap­proach that could po­ten­tially help var­i­ous groups of can­cer pa­tients. And now, in the hands of Amgen, this could be­come re­al­ity.

How did the com­pany get here? What was its tra­jec­tory on the way to be­come a major Eu­ro­pean biotech­nol­ogy com­pany?

Mi­cromet was founded in the first half of the nineties, as a spin­off of the im­munol­ogy de­part­ment of Mu­nich Uni­ver­sity and in­cor­po­rated in 1998. As most often hap­pens, the com­pany was started on a dif­fer­ent tech­nol­ogy from the one that has dri­ven it's value today. After a start as a can­cer di­ag­nos­tic com­pany, Mi­cromet moved on de­vel­op­ing a pipeline of new an­ti­body mol­e­cules, using ex­ist­ing plat­form tech­nolo­gies, in the same years when Gen­mab (an Index Ven­tures-backed com­pany), Medarex, Ab­genix and Cam­bridge An­ti­body (CAT) were also de­vel­op­ing pipelines of fully human an­ti­bod­ies. Backed by first tier ven­ture cap­i­tal­ists, the com­pany started its nor­mal ex­ploratory life as a pri­vate com­pany, broadly ex­plor­ing dif­fer­ent tech­nolo­gies and busi­ness mod­els. In the years be­tween 1996 and 2001 a num­ber of ven­ture rounds were se­cured by the com­pany, rais­ing a total of ap­prox­i­mately US$ 60m: the main asset back then was a clas­si­cal an­ti­body (MT201) and it was fol­lowed by other ear­lier stage mol­e­cules.

For good or bad rea­sons, we at Index had de­clined to in­vest at every sin­gle round of ven­ture fi­nanc­ing. In 2001, a new asset had started to ap­pear on the Mi­cromet pipeline table: MT103 (soon to be re­named bli­na­tu­momab). The rel­e­vance of this asset was also dri­ven by the fact that it was de­rived from a very in­no­v­a­tive an­ti­body tech­nol­ogy plat­form, being de­vel­oped by the com­pany, in par­al­lel to the main clas­si­cal an­ti­body busi­ness. Just very briefly, the new an­ti­body plat­form was called BiTE, for Bis­pe­cific T-Cell En­gagers), to de­scribe a very unique fea­ture of these novel an­ti­body mol­e­cules: dif­fer­ently from the clas­si­cal ones that only have the ca­pac­ity to bind to the anti­gen on the can­cer cell (sin­gle speci­fity), the BiTEs are also ar­ti­fi­cially equipped with an extra mol­e­c­u­lar hook, able to bind T-Cells, the ul­ti­mate ef­fec­tors in blood of the de­struc­tion of for­eign agents. In doing so, the BiTE an­ti­body was pre­dicted to be able to drag and force the ef­fec­tor mol­e­cule to the can­cer cell, which was still tar­geted by the other usual bind­ing speci­ficity as any other an­ti­body (hence  "bi-spe­cific").

Very neat and pow­er­ful sci­ence, but still the sec­ondary focus of the com­pany. Over the fol­low­ing years, the com­pany found more and more dif­fi­cult to keep on rais­ing money from pri­vate in­vestors, as the most ad­vanced lead mol­e­cules had not yet achieved the crit­i­cal point of "proof of con­cept". In 2006, Mi­cromet re­verse merges into Can­cer­vax, a US pub­lic com­pany, with ap­prox­i­mately US$30m in the bank and a light pipeline. The Mi­cromet man­age­ment team takes the lead­er­ship of the com­bined com­pany while the Mi­cromet share­hold­ers con­trol two thirds of the share cap­i­tal. This is ap­prox­i­mately 10 years after the first ven­ture cap­i­tal has been raised.  The re­sult­ing com­bined com­pany has a mar­ket value of ap­prox­i­mately US$ 120m, de­spite hav­ing raised close to US$ 100m. In the fol­low­ing cou­ple of years, the com­pany raises an ad­di­tional 30m USD, but life is still un­cer­tain. Then some­thing hap­pens.

In Au­gust 2008, Prof Bar­gou et al., pub­lish the first re­sults from the  clin­i­cal test­ing of MT103 (the first BiTE mol­e­cule), show­ing the first very im­pres­sive re­sponses in pa­tients. This is it: I still re­mem­ber vividly when Steve and Patrice, two bril­liant MDs that drive on­col­ogy in­vest­ments strat­egy at Index, claim they would bet their houses on the mol­e­cule. We in­vest, fi­nally, for the first time,  and an­chor the US$40m PIPE of Oc­to­ber 2008. Since that mo­ment, the com­pany raises ap­prox­i­mately an ad­di­tional US$ 220m, over var­i­ous fi­nanc­ings, con­sum­ing half of it, be­fore the US$1.2b ac­qui­si­tion by Amgen. Ar­guably this value is largely dri­ven by this sin­gle mol­e­cule, MT103, now re­named bli­na­tu­momab, but not only. The plat­form tech­nol­ogy is now val­i­dated and  the trick of the “extra hook” could pos­si­bly be ap­plied to many other can­cer in­di­ca­tions. What do we make of all this?

First of all, cel­e­bra­tion to the man­age­ment team and the CEO : Chris­t­ian Itin. Ex­pe­ri­enced en­tre­pre­neur, smart sci­en­tist, be­liever, and great ex­ec­u­tive leader. He joined the com­pany in 1999, as VP Busi­ness De­vel­op­ment, and was ap­pointed CEO in 2004. Since then, great lead­er­ship skills and tight focus on goals. This guy will prob­a­bly be a first level fig­ure in the biotech scene for many years to come. Sec­ondly, let's look at the fi­nan­cial met­rics. Over its life­time, the com­pany has ap­prox­i­mately burned US$ 250m, maybe some­thing more. If we place the key defin­ing event of the com­pany’s for­tunes in Au­gust 2008, when proof of con­cept (POC) is achieved, then we come to re­al­ize that around half of the US$250m were burned be­fore POC and half after POC.

For sim­plic­ity, the US$125m burned be­fore 2008 had been in­vested in many dif­fer­ent ex­ploratory tech­no­log­i­cal ef­forts and var­i­ous lead mol­e­cules and a mi­nor­ity in bli­na­tu­momab. This is the nat­ural cost of “ex­plo­ration”. Con­versely the US$125m ex­pensed since early 2009 were largely in­vested in the lead BiTE pro­gram. The first “ex­plo­rative” US$ 125m had brought the com­pany to a mar­ket val­u­a­tion of ap­prox­i­mately US$100m, the sec­ond “fo­cused” US$125m, have dri­ven the com­pany to the bil­lion dol­lar exit value. The “ex­plo­rative” cash is what makes early stage biotech in­vest­ing chal­leng­ing. Clearly the sec­ond part of the story would have not hap­pened with­out the ex­plo­rative phase, so the an­swer to solve the issue of early stage in­vest­ing is not to cut the ex­ploratory part.

Leav­ing Mi­cromet aside, an in­cread­i­bly well run com­pany, let’s look more broadly at the issue of the gen­er­ally bad re­turns on ex­ploratory re­search: let’s make sure that at least we re­al­ize  that we have to find ways to limit the cost of ex­plor­ing wrong av­enues as much as pos­si­ble, and that we need to think very hard about fi­nanc­ing mod­els and sources of cap­i­tal to op­ti­mize it, avoid­ing to ca­pit­u­late to the “this is the na­ture of the beast” ar­gu­ment. In the mean­time, con­grat­u­la­tions to Chris­t­ian and Mi­cromet: they have de­liv­ered im­mense value to the whole com­mu­nity.  And con­grat­u­la­tions to Amgen for the smart move.

*Fol­low Francesco on Twit­ter: @fderu­ber­tis