Shelf Registration MRNS
Biotech

Marinus Pharmaceuticals Inc (NASDAQ:MRNS) Is A Great Recovery Play

It’s only been a few days since we last looked at Marinus Pharmaceuticals Inc (NASDAQ:MRNS) but recent events dictate we take another look today.

At the time of our last coverage, available here, the company had just put out third quarter 2017 financials and was trading relatively flat on the release.

Shortly after our analysis, however, the company filed a shelf registration with the SEC that saw it register for a $200M mixed shelf offering by way of this S-3.

MRNS Daily Chart

MRNS Daily Chart

On the news, and over the session yesterday, the company has run to the tune of 10%, closing a large portion of the gap between the time of our previous coverage and the October highs in and around $7.80 a share.

Marinus is still trading around 18% off these just mentioned highs and we think this gap is set to close near term. In turn, it looks like the company might be a nice recovery play as we head into the end of 2017 and beyond.

Here’s what we’re thinking.

First, let’s quickly outline the registration. As is generally the case with these sorts of shelf registrations, management hasn’t been overly specific as to how it intends to allocate the funds raised. What we did learn, however, is that the proceeds will be used for general corporate purposes including clinical trial expenses, R&D and manufacturing.

That’s pretty vague, but this isn’t really a problem for us as we think we know exactly what the vast majority of any cash raised will be used for (we’ll get to this in a minute). There are two ways to look at these sorts of registrations. One, that they are a precursor to dilution and – by proxy – are an added risk factor for anyone looking to pick up an exposure to the company that does the registering.

That’s true, but the alternative view is that they allow the company (in this case, Marinus) to act quickly as and when it needs any development capital. Further, the registration allows for a bit of flexibility in the sense that the company can raise exactly what it needs to, quickly and easily. This, for us, is better than a large raise now that proves inflated as compared to capital necessity over the next, say, two years.

So what do we think the company is going to use the cash for?

This company is developing a drug called Ganaxolone in two target indications; one is an epilepsy-type condition called CDKL5 and the other is postpartum depression (PD), which is a type of depression that begins immediately after a mother gives birth and that lasts for (usually) around six weeks subsequent to childbirth.

The latter of these two indications has the real potential to generate income for Marinus, but the real target right now (as far as primary development catalysts are concerned) is the epilepsy indication.

And it’s this indication and, specifically, the program that underpins it, that we think will eat up the majority of any capital raised on the back of the shelf registration.

Not that that’s a bad thing, of course – it’s this program that’s really going to get the stock moving over the coming quarters.

So, we’re looking specifically at the initiation of a pivotal trial of Ganaxolone in the CDKL5 indication, which the company expects will initiate at some point during early 2018, as a major catalyst. Before then, we’ve got the outcome of an FDA meeting to discuss the trial in question; at which point we should learn if the company is going to head into the study with some favorable conditions.

As mentioned, there’s a dilution risk here and it would be foolish to ignore it completely. With that said, there’s plenty to like here and, if the company uses its registration wisely, dilution shouldn’t be too much of a problem.

Check out our previous coverage of this one here.

We will be updating our subscribers as soon as we know more. For the latest updates on MRNS, sign up below!

Image courtesy of willyk via Flickr

Disclosure: We have no position in MRNS and have not been compensated for this article.

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Marinus Pharmaceuticals Inc (NASDAQ:MRNS) Is A Great Recovery Play
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