Please take note of our new weekly feature: Every Friday, we’re going to bring you our latest advice and stock research on companies from our weekly Inner Circle Q&A service, in which I answer specific investment questions from our members.

I hope you enjoy and profit from the stock research we bring you in this new weekly feature.

Q: Dear Patrick: I would appreciate your stock research and advice on a company that appears to have a new approach to cancer treatment. Micromet is obviously a small and relatively unknown company, but if their expectations are realized I think it should be a big winner.

A: Micromet Inc., $4.82, symbol MITI on Nasdaq (Shares outstanding: 79.7 million; Market cap: $456.6 million; www.micromet.de), is focused on discovering, developing and marketing new antibody-based cancer treatments.

Micromet’s BiTE drugs aim to attach an antibody (or a blood protein) onto a molecule that attracts immune-system cells called T-cells to attack tumour cells.

The company’s most promising candidate is blinatumomab (M103). The drug has completed a Phase I trial on non-Hodgkin’s lymphoma and a Phase II trial on patients with acute lymphoblastic leukemia. (This aggressive type of leukemia attacks blood and bone marrow.)

Stock research: Micromet’s new drug is off to a good start

The drug had impressive results in the Phase II trial. However, this trial only involved a small, 12-patient sample. When the drug was given to acute lymphoblastic leukemia patients who had either relapsed or were not responding to conventional therapy, 75% went into remission, compared to a rate of 17% to 45% for those who continued conventional therapy.

In the U.S., once a new drug clears the initial testing phase, it must pass the three main stages of evaluation used by the Food and Drug Administration (FDA).

In Phase I trials, a small group of 20 to 80 healthy volunteers is selected to assess the drug’s safety, tolerability and possible side effects.

Phase II trials typically involve groups of 20 to 300 people. These trials assess how well the drug works and continue Phase I assessments. When a drug fails, it usually occurs during Phase II.

Phase III studies are the strictest scientific trials. These are conducted by two or more clinical research centres on patient groups of 300 to 3,000. They aim to compare the drug to the current “gold standard” of treatment. Phase III trials are the most expensive, time-consuming and difficult to design and run.

Our stock research turned up a number of advantages for Micromet—but use caution

In 2009, Micromet partnered with Bayer HealthCare Pharmaceuticals to develop an antibody that would target solid tumours, like prostate cancer. The deal could be worth as much as $429 million if the drugs are successful, although Bayer only paid Micromet $7 million upfront.

Micromet recently signed a deal with biotech giant Amgen that could be worth as much as $990 million. However, Micromet will get just $14 million upfront for a first antibody. If it develops a second antibody, it will get another $35 million. It could get a further $480 million if it meets certain standards. It would also get royalties if regulators approve the treatment.

Like all early-stage biotech stocks, Micromet entails considerable risk and volatility. However, it holds cash of $187.3 million, and it’s using that cash at a rate of about $64 million a year, so it has the funds to continue its clinical trials for nearly three years. As well, Bayer and Amgen are paying all the research and development costs on their collaborative drugs.

Micromet is okay to hold, but only for highly aggressive investors.

Next Friday, I’ll give you more stock research and advice from my exclusive Inner Circle service.