CARLSBAD -- Seeking new products to replace its failed flagship drug, Carlsbad's CancerVax Corp. has agreed to merge with Micromet AG, a privately held company based in Munich, Germany. The merger, which must be approved by both companies' shareholders, is expected to close in the second quarter of 2006.
To be named Micromet Inc., the merged company will develop drugs based on Micromet's antibody technology, David Hale, president and chief executive of CancerVax, said in a Monday conference call. CancerVax recently stopped testing of Canvaxin, its vaccine to treat melanoma, because of a lack of evidence that the drug was working.
"For CancerVax shareholders, we believe that the proposed transaction offers the opportunity to benefit from Micromet's substantial scientific and clinical expertise in its very promising product pipeline for the treatment of cancer and autoimmune and inflammatory disease," Hale said in the conference call.
The new company's North American headquarters will be in Carlsbad, and its European headquarters will be in Munich, Hale said. Stock in the new company will be 67.5 percent owned by shareholders of Micromet AG, and 32.5 percent owned by CancerVax shareholders, Hale said. Micromet will inherit CancerVax's listing on the Nasdaq stock exchange. Its proposed ticker symbol is MITI.
Hale will become chairman of the merged company. Micromet's chief executive, Christian Itin, will become president and chief executive. CancerVax's chief financial officer, William LaRue, will be chief financial officer of the combined company.
Reverse takeover
In financial jargon, CancerVax's merger is known as a "reverse takeover," because technically speaking, CancerVax is acquiring Micromet.
According to a filing with the Securities and Exchange Commission, Micromet and CancerVax will engage in a series of transactions that will turn Micromet into a wholly owned indirect subsidiary of CancerVax. But since most of the stock will be controlled by current Micromet AG shareholders, those shareholders will control the merged company.
The end result is that Micromet's shareholders will control a publicly traded company without having to go the normal route of conducting an initial public offering. Once on the Nasdaq, Micromet can raise money through additional offerings.
Money also will come from CancerVax's cash on hand. CancerVax had about $60 million in cash and cash equivalents as of the end of the third quarter of 2005, Hale said in the conference call. The combined company is expected to have from $57 million to $60 million cash, indicating that a substantial portion of the cash will come from CancerVax, Hale said.
This money will be used to fund development of Micromet's drugs, two of which are in clinical trials. One, MT201, is in Phase II trials to treat prostate and metastatic breast cancer. Phase II, the midpoint of the three-phase clinical trial process, is usually where evidence of a drug's effectiveness is first determined. The drug is being developed in partnership with Serono International S.A. of Geneva. Serono had also been CancerVax's partner in developing Canvaxin.
The other drug, MT103, is in Phase I testing for safety in treating the B cell variety of non-Hodgkin's lymphoma. It is being developed in partnership with MedImmune, a Gaithersburg, Md., biotech company.
Pounded by setbacks
As the name implies, CancerVax was formed around Canvaxin, which was developed at the John Wayne Cancer Institute in Santa Monica. The vaccine, made from proteins taken from cancer cells, was intended to stimulate the immune system of patients to fight off the melanoma.
Canvaxin had already reached clinical trials by the time CancerVax was formed. Usually, biotech companies such as CancerVax are founded on research, and only later progress to clinical trials. With a product already in clinical testing, CancerVax appeared to have good odds of success.
In late 2000, the company moved from Santa Monica to Carlsbad. Hale joined the company at the same time. At the time, Hale said he chose Carlsbad as headquarters because it was close to San Diego's dynamic biotech community, which has the support necessary for a biotech preparing to go to market.
However, Canvaxin suffered a series of clinical trial setbacks last year, so it discontinued development. In October, the company announced that it would lay off nearly 100 employees, leaving 83 on its payroll. As of Dec. 31, CancerVax's payroll had fallen to about 50 employees.
The company's stock has plunged over the last year. On Jan. 3, 2005, CancerVax stock closed at $10.37 per share. On Jan. 3, 2006, the stock closed at $1.33 per share. On Monday, CancerVax shares closed at $1.55 per share, up 6 cents for the day.
Contact staff writer Bradley J. Fikes at (760) 739-6641 or bfikes@nctimes.com.
