MEI Pharma ($MEIP) is a NASDAQ-listed $133M biotech based in San Diego that was spun out by prior owner Australian biotech Novogen ($NVGN), a firm now facing NASDAQ delisting for failing to meet requirements, in 2012. Though I can certainly understand the reluctance of rational biotech investors to avoid any firm even vaguely associated with Australian biotech because of those firms’ poor sense of accountability to shareholders, $MEIP doesn’t appear to warrant The Taint of Oz. Shares may be preparing to take on a much higher market capitalization.
(1) $MEIP plans to report full phase 2 data in March—coming quickly—on its agent pracinostat in myelodysplastic syndrome (MDS) and acute myelogenous leukemia (AML).
Pracinostat is a histone deacetylase (HDAC) inhibitor, and HDAC is an important epigenetic regulator of gene expression in cancer and in normal physiology. Pracinostat toxicity is minimal, and one wonders here if it may emerge as best-in-class HDACi. Histones control the transcription of DNA, and acetylation controls the histones. Histone deacetylase inhibition prevents the turning on of pathological genes. Pracinostat has a fine safety profile to date.
Partial and preliminary data were presented at ASH2014 in December, and beat expectations quite strongly. My prediction is that when $MEIP announces topline data in a month, we will see it is strong enough to enable phase 3 studies.
(2) a secondary offering in December drove down share price, which makes for a very attractive entry point here.
(3) according to a 10 February 2015 13-G filing, Franklin Advisers have more than doubled their stake in $MEIP by adding 1.5 million shares
(4) Wells-Fargo has just initiated $MEIP coverage with an outperform rating and $11 PT. Shares are now trading at around $4.35.
(5) even accounting for a maximum possible dilution owing to warrant exercise stemming from the December secondary offering, the market capitalization of $MEIP is less than half of that of comparable companies with similarly mature pipelines. $MEIP is likely to have two phase 3 trials running in 2H2015, justifying a market capitalization of at least $450M.
(6) the company’s mitochondrial respiratory chain inhibitor ME-344, now in phase 1 for epithelial ovarian cancer, may rival TetraLogic’s ($TLOG) birinapant for inducing apoptosis in this difficult-to-treat tumor type. This agent is an appealing asset. The company is also in preclinical development of a phosphatidylinositol-3 kinase inhibitor. These gives $MEIP a differentiated portfolio with three timely agents in categories that are fervently sought for trials. Its pipeline may draw notice of a larger suitor.
(7) MD Anderson physicians conducting phase 2 trials in AML and MDS for $MEIP have made favorable remarks about pracinostat.
Of nine patients with myelodysplastic syndrome (MDS) at high risk for devolving into leukemia, five achieved complete cytogenetic response (harder to achieve than mere clinical response) from treatment with pracinostat in combination with Vidaza (azacytidine), a nucleoside analog. This is a reversal of the DNA abnormalities driving the MDS, and is unprecedented in MDS.
Disclosures: My columns are journalism, not personal investing advice. Of companies mentioned, I have long positions in $MEIP and $TLOG. I have no short positions or options. I will not trade in any mentioned security for 7 days after this column appears.
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