Could you kindly comment on Micromet Inc. Your suggestions are most appreciated.
Thanks for the assignment. Micromet Inc. has had some positive news in the last few weeks. The development deal with Amgen Inc. could potentially be worth close to $-billion in payments dependent on reaching certain milestones in the lab.
The rub with any early stage biotech or pharmaceutical company is that they don't have a product in the market. All of their efforts at the lab bench are very expensive.The way that they pay the bills is by partnering with a bigger company that has the financial strength to fund the development. If you look at the last eight quarters reported by the company, they have lost money consistently.
In the case of MITI's deal with Amgen, the agreement covers the advancement of their BiTE platform in the treatment of solid tumors. BiTE mobilizes T-cells in the human body to attack and destroy cancer cells. The potential reward is huge but the road is long and not without risk. The company currently has two Phase I trials and a Phase II trial in progress. That's a long way from approval of a compound for sale.
Examination of the charts will provide some guidance as to the future prospects for this stock.
The three-year chart outlines the struggle that the shares have had with resistance along the 200-day moving average since January of 2011. Twice the stock failed to get through the barrier even on the Amgen news reported on July 11, 2011.
The six-month chart fails to provide evidence of an advance developing. The MACD and RSI are both indicating a continuation of the selling that started in mid-July. Currently the stock is testing support along the 50-day moving average where we would like to see it hold.
What is evident from the charts is that MITI is not a buy-and-hold stock. There is enough volume on a daily basis to trade it efficiently. If we look at the MACD, it signalled a buy in late March and a sell in late April for a 50-per-cent gain top to bottom. There was also another buy indicated in mid-June.
A few more things to have on your radar: In the last thirty sessions, the shares only traded above the average daily volume over the last three months six times. Three of them clustered around the Amgen announcement. If we are going to get a sustained advance, we need to see a healthy increase in volume.
The company is scheduled to report Q2 results on Aug. 4, 2011. I would expect that they will report another loss but that isn't an excuse to ignore it. Finally, biotech stocks enjoy a period of seasonal strength from late June to mid-September.
If you like the story, follow the charts daily and watch the indicators for buy and sell signals. The name of the game with this one is to find the trades that will increase your wealth.
Make it a profitable day and happy capitalism!
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