The following discussion contains forward-looking statements, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Part II - Item 1A below under the caption "Risk Factors."

The interim financial statements and this Management's Discussion and Analysis of the Financial Condition and Results of Operations should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2008, and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2009.

Ongoing Business Activities

We are a biopharmaceutical company developing novel, proprietary antibodies for the treatment of cancer, inflammation and autoimmune diseases. Our product development pipeline includes novel antibodies generated with our proprietary BiTE® antibody platform, as well as conventional monoclonal antibodies. BiTE antibodies represent a new class of antibodies that activate the T cells of a patient's immune system to eliminate cancer cells. T cells are considered the most powerful "killer cells" of the human immune system. Five of our antibodies are currently in clinical trials, while the remainder of our product pipeline is in preclinical development.

Our CD19 targeting BiTE antibody blinatumomab, also known as MT103, is being evaluated in a phase 2 clinical trial for the treatment of patients with acute lymphoblastic leukemia, or ALL, and in a phase 1 clinical trial for the treatment of patients with non-Hodgkin's lymphoma, or NHL. We currently expect to initiate a pivotal trial of blinatumomab in ALL patients in 2010. Until March 2009, blinatumomab was being developed under a collaboration and license agreement with MedImmune, LLC entered into in 2003 (the 2003 Agreement). In March 2009, MedImmune elected to end the clinical development of blinatumomab in North America, while continuing the development of the commercial manufacturing process at its cost. MedImmune also elected to commence the development of a new BiTE antibody for the treatment of hematological cancers under the terms of the 2003 Agreement. Further, MedImmune retained a one-time option to reacquire the commercialization rights to blinatumomab in North America at pre-defined terms upon the first marketing approval obtained by us for blinatumomab in the United States. In November 2009, we entered into a termination and license agreement (the 2009 Agreement) with MedImmune under which we acquired MedImmune's remaining rights to commercialize blinatumomab in North America. As a result of the 2009 Agreement, we now control the rights to develop and commercialize blinatumomab in all territories. Under the terms of the 2009 Agreement, MedImmune will sell to us the remaining stock of blinatumomab clinical trial material and will transfer the manufacturing process for this product candidate to us or our contract manufacturer.

A second BiTE antibody, MT110, is being tested in a phase 1 clinical trial for the treatment of patients with solid tumors. MT110 binds to the epithelial cell adhesion molecule, or EpCAM, which is overexpressed in many solid tumors. We are also developing our human monoclonal antibody adecatumumab, also known as MT201, which also binds to EpCAM and is being developed under a collaboration with Merck Serono. The current clinical development of this antibody includes a phase 2 clinical trial in colorectal carcinoma patients after complete resection of liver metastases, and a phase 1b clinical trial evaluating adecatumumab in combination with docetaxel for the treatment of patients with metastatic breast cancer. Our monoclonal antibody MT293, also known as TRC093, is licensed to TRACON Pharmaceuticals, Inc. and is being developed in a phase 1 clinical trial for the treatment of patients with cancer. MT203, a human antibody neutralizing the activity of granulocyte/macrophage colony stimulating factor, or GM-CSF, which has potential applications in the treatment of various inflammatory and autoimmune diseases, such as rheumatoid arthritis, psoriasis, or multiple sclerosis, is under development in a phase 1 clinical trial being conducted by our collaboration partner Nycomed. Our licensee Morphotek, a wholly-owned subsidiary of Eisai, is also expected to commence a phase 1 clinical trial in 2010 to evaluate our glycolipid-binding human antibody MT228 for the treatment of melanoma.

Our preclinical product pipeline includes several novel BiTE antibodies generated with our proprietary BiTE antibody platform technology. A BiTE antibody targeting carcinoembryonic antigen, or CEA, for the treatment of solid tumors is being developed in collaboration with MedImmune. In addition, we have entered into an option, collaboration and license agreement with Bayer Schering Pharma AG under which Bayer Schering Pharma was granted an exclusive option until January 2010 to license a specified BiTE antibody against an undisclosed solid tumor target. In October 2009, we entered into a collaboration and license agreement with sanofi-aventis for the development and commercialization of a BiTE antibody binding to another undisclosed solid tumor target. Other BiTE antibodies are in various stages of preclinical development.

To date, we have incurred significant research and development expenses and have not achieved any revenues from sales of our product candidates. Each of our programs will require a number of years and significant costs to advance through development. Typically, it takes many years from the initial identification of a lead compound to the completion of preclinical and clinical trials, before applying for marketing approval from the FDA or EMEA, or equivalent regulatory agencies in other countries and regions. The risk that a program has to be terminated, in part or in full, for safety reasons or lack of adequate efficacy is very high. In particular, we cannot predict which, if any, product candidates can be successfully developed and for which marketing approval may be obtained, or the time and cost to complete development and receive marketing approvals.

As we obtain results from preclinical studies or clinical trials, we may elect to discontinue the development of one or more product candidates for safety, efficacy or commercial reasons. We may also elect to discontinue or delay development of one or more product candidates in order to focus our resources on more promising product candidates. Our business strategy includes entering into collaborative agreements with third parties for the development and commercialization of certain of our product candidates. Depending on the structure of such collaborative agreements, a third party may be granted control over the clinical trial process, manufacturing process or other key development process, for one of our product candidates. In such a situation, the third party, rather than us, may in fact control development and commercialization decisions for the respective product candidate. Consistent with our business model, we may enter into additional collaboration agreements in the future. We cannot predict the terms of such agreements or their potential impact on our capital requirements. Our inability to complete our research and development projects in a timely manner, or our failure to enter into new collaborative agreements, when appropriate, could significantly increase our capital requirements and affect our liquidity.

Since our inception, we have financed our operations through public offerings and private placements of preferred stock, common stock and associated warrants, government grants for research, research-contribution revenues from our collaborations with pharmaceutical companies, licensing and milestone payments related to our product candidate partnering activities, debt financing and equity draws under the CEFF with Kingsbridge. We may seek funding through public or private financings in the future. If we raise additional funds through the issuance of equity securities, stockholders may experience substantial dilution, or the equity securities may have rights, preferences or privileges senior to existing stockholders. If we raise additional funds through debt financings, these financings may involve significant cash payment obligations and covenants that restrict our ability to operate our business. There can be no assurance that we can raise additional capital on acceptable terms, or at all.

Research and Development

Through September 30, 2009, our research and development expenses consisted of costs associated with the clinical development of adecatumumab, blinatumomab and MT110, as well as development costs incurred for MT111 and MT203, and research conducted with respect to our preclinical BiTE antibodies and the BiTE antibody platform. The costs incurred include costs associated with clinical trials and manufacturing processes, quality systems and analytical development, including compensation and other personnel expenses, supplies and materials, costs for consultants and related contract research, facility costs, license fees and depreciation. We charge all research and development expenses to operations as incurred.

We expect to incur substantial additional research and development expenses that may increase from historical levels as we further develop our product candidates into more advanced stages of clinical development and increase our preclinical development for certain of our human antibodies and BiTE antibodies in cancer, anti-inflammatory and autoimmune diseases.

Our strategic collaborations and license agreements generally provide for our research, development and commercialization programs to be partly or wholly funded by our collaborators and provide us with the opportunity to receive additional payments if specified development or commercialization milestones are achieved, as well as royalty payments upon the successful commercialization of any products based upon our collaborations. We also may retain co-promotion rights in certain of our agreements.

Under our collaboration agreement with Merck Serono, we have received $22.0 million in up front and milestone payments from Merck Serono to date, not including reimbursements for costs and expenses incurred in connection with the development of adecatumumab. The agreement provides for potential future clinical development milestone payments of up to an additional $126.0 million. In a November 2006 amendment to the original agreement, we and Merck Serono agreed that Micromet would continue to conduct an ongoing phase 1 clinical trial testing the safety of adecatumumab in combination with docetaxel in patients with metastatic breast cancer. In October 2007, we and Merck Serono further amended the agreement and reallocated certain of our respective development responsibilities with respect to adecatumumab. As part of the revised responsibilities, Micromet now has all decision making authority and operational responsibility for the clinical trials conducted by us. Merck Serono will continue to bear the development expenses associated with the collaboration in accordance with the agreed-upon budget.

Through March 2009, we developed blinatumomab under the 2003 Agreement. Under the 2003 Agreement, MedImmune reimbursed a portion of the clinical development costs incurred by us in our clinical trials in Europe. In November 2009, we entered into the 2009 Agreement under which we acquired MedImmune's remaining option right to commercialize blinatumomab in North America. The 2009 Agreement terminates the 2003 Agreement, under which MedImmune had been granted the right to develop and commercialize blinatumomab and other BiTE antibodies binding to antigens relevant for hematological cancers in North America. As a result of the 2009 Agreement, we now control the rights to develop and commercialize blinatumomab in all territories, as well as any other BiTE antibodies binding to antigens relevant for hematological cancers that had been licensed to MedImmune under the 2003 Agreement. Under the terms of the 2009 Agreement, MedImmune will sell to us the remaining stock of blinatumomab clinical trial material and will transfer the manufacturing process for this product candidate to us or our contract manufacturer. In return, we will make an upfront payment of $6.5 million in installments through December 2010. In addition, MedImmune is eligible to receive up to an aggregate of $19 million from us based upon the achievement of specified strategic and regulatory milestone events relating to blinatumomab in North America and a low single-digit royalty based on net sales of blinatumomab in North America.

A second agreement with MedImmune under which we are collaborating with MedImmune on the development of MT111 provides for potential future milestone payments and royalty payments based on future sales of MT111. The potential milestone payments are subject to the successful completion of clinical development and obtaining marketing approval in one or more national markets.

In October 2009, we and sanofi-aventis entered into a collaboration and license agreement under which the two companies will collaborate on the development of a new BiTE® antibody targeting solid tumors. Under the terms of the agreement, we will be responsible for generating and developing the BiTE antibody through the completion of phase 1 clinical trials, at which point sanofi-aventis will assume full control of the development and commercialization of the product candidate on a worldwide basis. We will receive an upfront payment of €8 million and are eligible to receive payments upon the achievement of development milestones of up to €162 million and sales milestones of up to €150 million, and up to a low double-digit royalty on worldwide net sales of the product. In addition, sanofi-aventis will bear the cost of development activities and will reimburse us for our expenses incurred in connection with the development program. A portion of the upfront payment in the amount of €2.75 million will be credited towards the reimbursement of FTEs allocated by us to the performance of the development program.

We intend to pursue additional collaborations to provide resources for further development of our product candidates and may grant technology access licenses. However, we cannot forecast with any degree of certainty whether we will be able to enter into collaborative agreements, and if we do, on what terms we might do so.

We are unable to estimate with any certainty the costs we will incur in the continued development of our product candidates. However, we expect our research and development costs associated with these product candidates to increase as we continue to develop new indications and advance these product candidates through preclinical and clinical trials.

Clinical development timelines, the likelihood of success and total costs vary widely. We anticipate that we will make determinations as to which research and development projects to pursue and how much funding to direct to each project on an ongoing basis in response to the scientific and clinical success of each product candidate as well as relevant commercial factors.

The costs and timing for developing and obtaining regulatory approvals of our product candidates vary significantly for each product candidate and are difficult to estimate. The expenditure of substantial resources will be required for the lengthy process of clinical development and obtaining regulatory approvals as well as to comply with applicable regulations. Any failure by us to obtain, or any delay in obtaining, regulatory approvals could cause our research and development expenditures to increase and, in turn, could have a material adverse effect on our results of operations.

Results of Operations

Comparison of Three Months Ended September 30, 2009 and 2008

Revenues. The following table summarizes our primary sources of revenue for the
periods presented (in millions):

                                            Three Months Ended
                                    September 30,         September 30,
                                        2009                  2008

 Collaborative R&D Revenue:
 Nycomed                           $           0.7       $           4.4
 Bayer Schering                                1.6                     -
 MedImmune                                     0.3                   1.7
 Merck Serono                                  0.7                   0.7
TRACON                                         0.1                     -
Other                                            -                   0.1
 Total collaborative R&D revenue               3.4                   6.9
 License and other revenue                     0.6                   0.1
 Total revenues                    $           4.0       $           7.0

Collaborative R&D Revenue. Collaborative R&D revenue consists of reimbursements for full-time equivalents and pass-through expenses we incur under each collaborative agreement.

Nycomed. Collaborative research and development revenues from Nycomed reflect Nycomed's full cost responsibility for the MT203 product development program. The Nycomed revenue represents the reimbursement of our preclinical development activities, including reimbursement for full-time equivalents as well as the portion of the up-front payment from Nycomed that is being recognized over a 20-year period ending in 2027. The decrease in revenue of $3.7 million for the three months ended September 30, 2009 compared to the same period in 2008 was due primarily to lower level of activity performed by us as Nycomed assumed primary responsibility for the development of MT203.

Bayer Schering. Revenues from Bayer Schering represent a portion of the upfront option fee of approximately $6.0 million received in January 2009 under an option, collaboration and license agreement. The option fee is being recognized over the option period of one year.

MedImmune. Collaborative research and development revenues from MedImmune represent reimbursements received from MedImmune for our costs incurred in the development of blinatumomab and MT111. The decrease in MedImmune revenue was primarily due to the termination of MedImmune's participation in the development of blinatumomab in North America. As described elsewhere in this report, the 2003 Agreement was terminated in November 2009, and therefore there will be no further collaborative research and development revenue for blinatumomab in future periods except for the final payment due from MedImmune for development activities performed by Micromet under the 2003 Agreement.

Merck Serono. Collaborative research and development revenues from Merck Serono reflect Merck Serono's full responsibility for the costs for the development of the adecatumumab program. We expect 2009 revenues to be generally consistent with those of 2008.

TRACON. Collaborative research and development revenues from TRACON reflect TRACON's full responsibility for the costs of the MT293 product development program. Revenue under this agreement consists of miscellaneous pass-through expenses and the portion of the upfront payment received from TRACON that is being recognized over a 15-year period ending in 2022.

License and Other Revenue. License and other revenue consists primarily of revenues from licenses of patents relating to single-chain antibody technology, for which we serve as the exclusive marketing partner under a marketing agreement with Enzon Pharmaceuticals, Inc.

Research and Development Expenses. Research and development expense consists of costs incurred to discover and develop product candidates. These expenses consist primarily of salaries and related expenses for personnel, outside service costs including production of clinical material, fees for services in the context of clinical trials, medicinal chemistry, consulting and sponsored research collaborations, and occupancy and depreciation charges. Process development expenses were mainly incurred for production of GMP-grade clinical trial material, as well as fermentation, purification and formulation development. Preclinical development expenses cover pharmacological in vitro and in vivo experiments as well as development of analytical testing procedures. Except for payments made in advance of services rendered, we expense research and development costs as incurred. Payments made in advance of services are recognized as research and development expense as the related services are incurred.

Research and development expenses were $13.3 million and $9.9 million for the three months ended September 30, 2009 and 2008, respectively. We recorded a non-cash impairment charge of $2.6 million related to the patents we acquired in 2001. We also recorded within research and development expenses a non-cash share-based compensation charge of $0.9 million and a severance accrual of $0.3 million in 2009 related to a former executive. Program spending on our blinatumomab program increased by $0.7 as we assumed full responsibility for the clinical development of this product candidate, and there were expense increases in our new BiTE antibody programs of $0.5 million as these programs advance in preclinical development. Partially offsetting these increases were decreases in the MT203 program of $2.9 million as a result of Nycomed assuming primary responsibility for the development of MT203.

We track our external research and development expenses by major project candidate development program, such as for blinatumomab, MT203, adecatumumab and MT110, or allocate such expenses to our BiTE antibody platform. We do not allocate salary and overhead costs or stock-based compensation expense to specific projects or product candidates. Our incurred research and development expenses for the three months ended September 30, 2009 and 2008 are summarized in the table below (in thousands):

                                     Three Months Ended
                                        September 30,
                                      2009          2008
Blinatumomab                       $     1,281     $   557
MT203                                       29       3,205
Adecatumumab                               928         234
MT110                                      544         279
BiTE antibody platform and other         1,017         279
Unallocated salary and overhead          8,146       5,045
Share-based compensation                 1,379         344
Total                              $    13,324     $ 9,943

General and Administrative Expenses. General and administrative expense consists primarily of salaries and related costs for personnel in executive, finance, accounting, legal, information technology, corporate communications and human resource functions. Other costs include facility costs not otherwise included in research and development expense, insurance, and professional fees for legal and audit services. General and administrative expenses were $3.8 million and $3.4 million for the three months ended September 30, 2009 and 2008, respectively. The increase is primarily related to an increase in recruiting expenses of $0.1 million and higher legal fees of $0.2 million.

Interest Expense. Interest expense for the three months ended September 30, 2009 and 2008 was $52,000 and $45,000, respectively. The increase was due to the amortization of premiums on our investments.

Interest Income. Interest income for the three months ended September 30, 2009 and 2008 was $66,000 and $183,000, respectively. The decrease was due to lower interest rates during 2009 as compared to 2008.

Change in Fair Value of Common Stock Warrants Liability. Under the terms of the warrants issued in connection with a private placement that we closed in June 2007, if at any time while any of the warrants is outstanding, we are merged or consolidated with or into another company, we sell all or substantially all of our assets in one or a series of related transactions, any tender offer or exchange offer is completed pursuant to which holders of our common stock are permitted to tender or exchange their shares for other securities, cash or property, or we effect any reclassification of our common stock or any compulsory share exchange pursuant to which the common stock is effectively converted into or exchanged for other securities, cash or property, then we (or any successor entity) are obligated to purchase any unexercised warrants from the holder for cash in an amount equal to its value computed using the Black-Scholes option-pricing model with prescribed guidelines. As a consequence of these provisions, the warrants are classified as a liability on our balance sheet, and changes in our stock price cause the fair value of the warrants to change each reporting period, with these changes being reflected in the statement of operations. Increases in our stock price cause the warrant liability to increase, and this increase is recorded as a component of other (expense), while decreases in our stock price cause the liability to decrease, which is recorded as a component of other income. The expense of $6.4 million recorded during the third quarter of 2009 represents an increase in the fair value of the warrant as of September 30, 2009 as compared to its value on June 30, 2009. The expense of $6.8 million recorded during the third quarter of 2008 represents an increase in the fair value of the warrant as of September 30, 2008 as compared to its value on June 30, 2008.

Comparison of Nine Months Ended September 30, 2009 and 2008

Revenues. The following table summarizes our primary sources of revenue for the
periods presented (in millions):

                                            Nine Months Ended
                                   September 30,         September 30,
                                       2009                  2008

Collaborative R&D revenue:
Nycomed                           $           6.4       $          12.4
Bayer Schering                                4.6                     -
MedImmune                                     2.0                   5.5
Merck Serono                                  2.1                   2.3
TRACON                                        0.2                   0.2
Other                                           -                   0.2
Total collaborative R&D revenue              15.3                  20.6
License and other revenue                     1.1                   0.8
 Total revenues                   $          16.4       $          21.4

The decrease in revenue from Nycomed for the nine months ended September 30, 2009 compared to the same period in 2008 was due primarily to a decrease in ongoing development revenue of $7.2 million under this collaboration as the program progresses from the pre-clinical stage to clinical trials, and the responsibility for the development work shifts to Nycomed. Partially offsetting this decrease was the receipt of a milestone payment of approximately $2.0 million recognized as revenue during 2009 as a result of Nycomed's filing of a clinical trial application for MT203 in Europe, as compared to milestone revenue of $0.8 million received in the same period in 2008.

Bayer Schering. Revenues from Bayer Schering represent a portion of the upfront option fee of approximately $6.0 million received in January 2009 under an option, collaboration and license agreement. The option fee is being recognized over the option period of one year.

MedImmune. The decrease in MedImmune revenue was primarily due to the discontinuation of a research program for EphA2 in the fourth quarter of 2008 . . .