MEI Pharma Inc (NASDAQ:MEIP) has been a rewarding stock to hold over the last six months but, as things stand, it remains somewhat under the radar. The company traded for less than $1.50 a share back of the start of January. On July 7, this had risen to $2.88 and share price currently sits at $2.76 – a more than 84% appreciation across the period.
The appreciation hasn’t really come on the back of and major fundamental developments, at least not any that we would normally associate with a reevaluation of this degree. What it has come on the back of, however, as far as we see it, is speculative loading in anticipation of a number of key catalysts set to hit the press over the coming 6 to 12 months.
With this in mind, there’s every chance that – as these catalysts read out – this company could continue to appreciate.
Here is what we are looking at is supportive of this thesis near term.
This one is a biotechnology company that is working to develop a few different pipeline assets, primarily targeting oncology indications. The lead asset right now is a drug called Pracinostat and it is being developed in partnership with a Swiss healthcare company called Helsinn Healthcare SA. Some readers might already be familiar with this company, with this familiarity probably rooted in the latter’s lawsuit with generic healthcare giant Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA). That’s a digression, however. For those that aren’t familiar with Helsinn, there’s not much pertinent information necessary other than it is a healthcare company focused on oncology and that it’s providing a large portion of the capital required to get Pracinostat through its respective development programs and towards commercialization in the US.
So where are the catalysts coming from?
There are two programs that we are interested in as far as the next six months is concerned. The first is a phase 3 investigating the safety and efficacy of Pracinostat in a target indication of acute myeloid leukemia (AML). This study is fully funded and should kick off at some point during the latter half of this year. Initiation is a catalyst alongside any near-term interim release from the investigation as it matures towards completion.
The second program is a phase 2 focusing on the same drug in a target indication of high-risk myelodysplastic syndrome (MDS). This one is likely a larger dollar volume potential indication so, while it is only a phase 2 study, it has the potential to move the company more on successful completion than does the above-noted phase 3 program. We say this not to negate the phase 3, but just to add a bit of perspective. This one was slated to initiate in June this year (again in collaboration with Helsinn) and, just as forecast, the company announced on June 14 that it had initiated the study investigating the drug when used in combination with another asset called azacitidine, which is better known by its trade name Vidaza and currently serves as a standard of care therapy in the MDS population.
If MEI can demonstrate that the addition of Pracinostat can improve on a standard dose of azacitidine in patients receiving MDS treatment and, just as importantly, if the company can ascertain an optimum dose as part of the current phase II study (on the news this dose to underpin the protocol for a pivotal trial in the same indication), there’s considerable upside revaluation potential on the initial study’s outcome.
That’s a lot of ifs, but each is far from unattainable.
Aside from Pracinostat and its deeper pipeline (which includes assets like ME-401 in follicular lymphoma and ME-344 in HER-2 negative breast cancer), what makes this one attractive is the partnership with Helsinn and, specifically, the funding that this partnership brings with it. Normally, for a company at this end of the biotechnology sector, the potential for dilution would play a serious role in the risk reward equation.
With the partnership in place and the lead program fully funded, however, this role is minimized at worst and completely negated at best, making this a relatively low-risk allocation for an investor looking to get in at current prices.
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Disclosure: We have no position in MEIP and have not been compensated for this article.