In a deal worth up to $100 million, Micromet Inc. licensed the preclinical anti-angiogenesis monoclonal antibody D93 to privately held Tracon Pharmaceuticals Inc.

Micromet's stock (NASDAQ:MITI) soared 50 percent Friday morning before edging back down to close at $3.25, still managing a gain of 35 cents, or 12 percent, for the day. Christian Itin, Micromet's president and CEO, attributed the stock movement both to the deal and the "substantial amount of progress" discussed in the company's year-end earnings, which also were released on Friday.

Micromet beat fourth-quarter estimates of a 25 cent-per-share loss by posting an 11 cent-per-share gain, due primarily to the receipt of a milestone payment. For the year ended Dec. 31, 2006, the company reported a net loss of $34 million, or $1.29 per share, while analysts had expected a loss of only 95 cents per share.

The deal with Tracon will add to Micromet's year-end cash balance of $24.3 million. Although detailed terms were not disclosed, Micromet will receive both up-front and milestone payments that may top $100 million, as well as royalties. In exchange, Tracon gets exclusive worldwide rights to develop and commercialize D93.

D93 is a recombinant humanized IgG1 monoclonal antibody that binds to cleaved collagen within the extracellular matrix. The collagen becomes exposed during angiogenesis, and the drug's binding prevents the angiogenic process from progressing.

D93 originally was developed at Los Angeles-based biotech Cell-Matrix Inc., which was acquired by Carlsbad, Calif.-based CancerVax Corp. in 2002. At CancerVax, the program took a backseat to the company's Phase III cancer vaccine, Canvaxin. Yet the Cell-Matrix subsidiary continued preclinical work, demonstrating that D93 suppressed angiogenesis, worked synergistically with Taxol (paclitaxel, Bristol-Myers Squibb Co.), and inhibited tumor growth in animal models of breast cancer, pancreatic cancer and melanoma. (See BioWorld Today, Jan. 10, 2002.)

In early 2006, the FDA granted CancerVax's investigational new drug application to start a Phase I trial with D93 in solid tumors. But before that trial was initiated, Phase III failures with Canvaxin lead to CancerVax's demise and eventual merger with Micromet. (See BioWorld Today, Apr. 7, 2005; Oct. 5, 2005; and Jan. 10, 2006.)

Although Micromet focuses on antibody-based products for cancer, Itin explained that the Carlsbad, Calif.-based company is licensing out its traditional antibodies so that it can focus on its proprietary BiTE molecules. The clinical-stage cancer antibody MT201 already is partnered with Merck Serono of Geneva, and just last week Micromet licensed another cancer antibody to Morphotek Inc of Exton, Pa. Two preclinical antibodies for inflammation, MT203 and MT204, also are up for sale.

That leaves Micromet with a pipeline of BiTE molecules, which bind a tumor-associated antigen and a T cell, triggering the T cell to recognize and destroy the tumor cell.

Lead molecule MT103 (MEDI-538) is being studied in a European Phase I B-cell lymphoma trial. An interim analysis of four patients showed one complete response and two partial responses, at doses "100,000-fold below Rituxan," Itkin said.

Micromet plans to start a European Phase II trial in acute lymphocytic leukemia in the second half of 2007, and North American partner MedImmune Inc. is planning a U.S. Phase I trial in non-Hodgkin's lymphoma for the first half of this year. Of its preclinical BiTE molecules, Micromet plans to advance MT110, which targets the EpCAM tumor-associated antigen, into the clinic late this year.

With no time for D93, Micromet licensed the drug to Tracon, which Itkin said he chose because of the team's "excellent track record in developing biologicals and anti-angiogenic focus."

San Diego-based Tracon was founded in April 2005 by Bertrand Liang, who previously served as vice president of development and head of new ventures at Biogen Idec Inc. When Liang decided to start up the San Diego office of New York-based venture capital firm Paramount BioSciences, he stepped back to chairman of Tracon and filled the senior management ranks with executives who had contributed to the development of Rituxan (rituximab, Genentech Inc. and Biogen Idec Inc.), Zevalin (ibritumomab tiuxetan, Schering AG and Biogen Idec Inc.), Sutent (sunitinib, Pfizer Inc.), Macugen (pegaptanib, OSI Pharmaceuticals Inc. and Pfizer Inc.) and other drugs.

"The value of the company is in the people," said Tracon president and CEO Charles Theuer. An interesting point, considering Tracon has only four employees. Like many start-ups today, it's seeking to limit front-end expenditures by in-licensing compounds, handling strategic planning in house, and outsourcing preclinical and clinical development. Theuer added that Tracon can afford to "run lean" because Paramount provides functions like business development, legal and regulatory.

Tracon is exploring a Series A financing, but has survived thus far on convertible debt. Theuer said the company is trying to avoid the "typical multiple VC round" financing model, adding that Paramount companies also tend to obtain financing through the public markets or through PIPEs and reverse mergers.

Even with limited funds, Tracon has built an impressive pipeline. Farthest along is TRC102, a small molecule that inhibits DNA repair to prevent chemotherapy resistance in cancer cells. A Phase I trial in combination with Temodar (temozolomide, Schering Plough Corp.) is slated for early in the second quarter, with an investigational new drug application for trials in combination with Alimta (pemetrexed, Eli Lilly & Co.) to follow by the end of the year.

Next up is TRC105, a first-in-class monoclonal antibody that binds CD105. Theuer said he expects the mechanism of action to complement therapies that work through the VEGF pathway, such as Avastin (bevacizumab, Genentech Inc.) and Sutent. An IND filing in cancer is planned for mid-summer, followed by an IND filing in age-related macular degeneration by the end of the year.

Tracon plans to start a Phase I trial with D93 in solid tumors by the end of the second quarter. Preclinical work also is ongoing with TRC101, a liposomal encapsulation of Taxotere (docetaxel, Sanofi-Aventis Group) and ceramide, an apoptotic factor normally depleted in cancer cells.