Munich spin-out Micromet taps US market in CancerVax merger

European biotech markets may be holding promise of a recovery, but a German spin-off isn’t waiting: Micromet AG, a spin-off from the Institute for Immunology at Munich University, moved to gain a U.S. stock listing by agreeing to merge with CancerVax Corp., a Nasdaq-listed US cancer vaccine company, in an all-share deal.

Munich-based Micromet would offer CancerVax shareholders 32.5 per cent of the combined group while the rest will be owned by the Micromet’s shareholders. Evelyn Wolf, the head of corporate communications at Micromet, said in an interview that the combined company would have $57 million to $60 million in cash, cash equivalents and securities available for sale. The market capitalization of the combined company will be about “$140 million based on the current stock price,” she said.  She declined to comment further on the value of the deal.

Merger with a smaller U.S.-listed company, rather than a direct listing there, is a common method for non-U.S. companies to tap into the vast American capital markets. But Micromet’s move comes as the European biotech market is buzzing with new stock offerings and trade sales – leading many market analysts to express optimism for a long-awaited recovery in Europe. But Micromet apparently still sees more opportunity in the bigger U.S. capital market. 

“For Micromax there are a couple of strategic reasons” for merging with CancerVax, Wolf said, including gaining access to US capital markets. “It would have been one option for Micromet to seek a listing on the European market. But given that the condition of the European market is not that attractive for biotech, this is an opportunity to create a transatlantic company and CancerVax fits with our strategy as it is doing therapeutics for cancer.”

In October 2005 CancerVax had to stop the development and clinical trails of its lead cancer drug, Canvaxin, after Phase III trials showed disappointing results. CancerVax later downsized the company's work force by more than half to about 80 staff.

That decision came seven months after the company halted a Phase III evaluation of Canvaxin in Stage IV melanoma patients, characterized by the spread of cancer from lymph nodes to organs, due to an apparent lack of survival benefit. That move followed news that CancerVax's partner, Serono SA, was pulling out of the Stage IV Canvaxin program.

Micromet is developing human antibodies to fight cancer and has already linked with Serono to develop and market a drug for the treatment of breast and prostate cancer. The drug, in clinical trials, is called MT201.

Both Micromet and CancerVax’s boards have to approve the merger, which requires shareholder approval. The votes are expected in the second quarter.

Micromet's stakeholders include 3i Group plc, Permira and Schroder Ventures Life Sciences. Before its IPO, CancerVax’s investors include Forward Ventures, Amerindo Investment Advisors Inc., Vector Fund Management and Athenian Venture Partners.

The company was a spin-off from the Institute for Immunology, MunichUniversity in 1993. Its partners include MedImmune, Enzon, Boehringer Ingelheim and has 85 employees.

After the closing of the transaction, the company's shares are expected to continue to trade on the Nasdaq exchange. CancerVax will be renamed as Micromet. The combined group will be based in Carlsbad, Ca. CancerVax CEO David Hale will become chairman of the new combined group. Micromet's Chief Executive Christian Itin will be its CEO. Six of the nine board members will come from Micromet while CancerVax will appoint three.

Piper Jaffray & Co. is the financial adviser to CancerVax while Latham & Watkins LLP is its counsel. Cooley Godward LLP is the counsel to Micromet.

Micromet's announcement