In a transaction that augments one company's pipeline and gives the other U.S. market access, CancerVax Corp. and Micromet AG signed a definitive merger agreement.

Based on CancerVax's closing $1.49 stock price Friday, the deal has a total value of $126.7 million. The stock (NASDAQ:CNVX) rose 6 cents Monday to close at $1.55.

The agreement comes just three months after Carlsbad, Calif.-based CancerVax discontinued development of its lead drug, Canvaxin, when interim data indicated it would not show a significant survival benefit over placebo in Stage III melanoma patients.

"After our disappointing results with our Phase III program for Canvaxin, we looked at a number of strategic alternatives," said David Hale, the company's president and CEO. "During the process, we came in touch with Micromet, and we were very impressed with their clinical development portfolio products, their management team and their technology platform."

Combined, the companies expect to have about 95 people working at the U.S. headquarters in Carlsbad and the European headquarters in Munich, Germany, where Micromet is based. That's only about half of the 183 employees that CancerVax employed on its own, before cutting 100 jobs in October, when it terminated development of Canvaxin. More lay-offs might occur, since all research and development operations now will be consolidated in Munich. (See BioWorld Today, Oct. 5, 2005.)

Founded in 1993, Micromet has two cancer products in clinical development: MT201 in Phase II trials for metastatic breast and prostate cancers, and MT103 in Phase I for non-Hodgkin's lymphoma. It also is developing at the preclinical stage MT110 for solid tumors and MT203 for inflammatory diseases.

"What we were looking for was accelerating our development going forward," Christian Itin, Micromet's CEO, told BioWorld Today.

The opportunity to merge with CancerVax "gave us not only access to the U.S. markets and an excellent infrastructure," he said, but it provided Micromet with another preclinical pipeline product, D93 for solid tumors, which "fits very well into the development pipeline."

CancerVax will issue shares of its stock so that Micromet owns about 67.5 percent on a pro-forma basis, and CancerVax owns about 32.5 percent. Once the transaction is complete, there will be 85 million shares outstanding, and the new entity will have between $57 million and $60 million in cash, cash equivalents and securities available for sale. The merger is expected to close in the second quarter, following shareholder approval. Both boards have voted in favor of it.

CancerVax will be renamed Micromet Inc. and the Nasdaq ticker symbol will change to "MITI." Hale will become chairman of the merged company, while Itin will become president and CEO and will serve on its board. The positions of chief medical officer, chief financial officer, chief operating officer and general counsel will be filled by Patrick Baeuerle, William LaRue, Gregor Mirow and Hazel Aker, respectively. The board will consist of four Micromet directors, three CancerVax directors, one director who currently serves on both boards, and a ninth person to be named later by Micromet.

The merged company will focus on antibody-based drugs for oncology, autoimmune and inflammatory diseases, leveraging Micromet's BiTE (bi-specific T-cell engager) technology and single-chain antibody drug development platforms.

Phase II data of MT201 (adecatumumab), the lead product in the pipeline, are expected this year for metastatic breast cancer and prostate cancer. It is a recombinant human monoclonal antibody of the IgG1 subclass with a binding specificity to epithelial cell adhesion molecule (Ep-CAM).

"Ep-CAM is overexpressed with high frequency on most solid tumor types, including prostate, breast, colon, gastric, ovarian and lung cancer," Itin said.

MT201 also is being studied as a combination therapy with Taxotere (docetaxel) in a Phase I trial in patients with metastatic breast cancer.

Micromet formed a worldwide development and commercialization collaboration for MT201 with Geneva-based Serono SA in December 2004, under which the German company received an initial $10 million fee and is entitled to up to $138 million in milestone payments, as well as royalties. Micromet has a profit-sharing option to co-develop and co-commercialize the product in the U.S.

Serono, notably, was CancerVax's partner for Canvaxin. The deal was formed also in December 2004. (See BioWorld Today, Dec. 17, 2004.)

The other clinical-stage product, MT103, binds to CD19 on B cells, a cell-surface antigen, and is based on the BiTE Technology. It is in a European Phase I trial for non-Hodgkin's lymphoma, and is partnered in North America with MedImmune Inc., of Gaithersburg, Md.

The BiTE technology appears to activate T cells in a patient's body, regardless of their specificity, enabling them to circumvent tumor cell defense mechanisms. Micromet uses single-chain antibodies to build its BiTE product candidates under an exclusive license from Enzon Pharmaceuticals Inc., of Bridgewater, N.J. Micromet, in turn, has licensed the technology to a number of companies, such as Alexion Pharmaceuticals Inc., of Cheshire, Conn.; XOMA Corp., of Berkeley, Calif.; and Bristol-Myers Squibb Co., of New York.

CancerVax's preclinical product, D93, is a humanized, monoclonal antibody that has been shown to selectively bind to denatured collagen targets in colon, melanoma, lung and breast cancer tumors grown in xenogeneic mouse models. The company expects to file an investigational new drug application for D93 this quarter, with plans to start a Phase I trial later in 2006.

While CancerVax does have another product set to enter the clinic this year, it is not antibody-based. SAI-EGF targets the epidermal growth factor receptor signaling pathways and is ready to enter clinical trials in non-small-cell lung cancer. CancerVax licensed it, along with two preclinical candidates, from the Cuban company Cimab SA in 2004. (See BioWorld Today, July 16, 2004.)

"Our plans are to seek to license the product candidates," Hale said.

For the merger agreement, Piper Jaffray & Co., of Minneapolis, served as financial adviser, and Latham and Watkins LLP acted as legal adviser to CancerVax, while Cooley Godward LLP served as legal adviser to Micromet.