On July 25, 2019, MediciNova, Inc. (NASDAQ:MNOV) filed form 10-Q with financial results for the second quarter of 2019. As expected, the company did not report any revenues for the second quarter of 2019. Net loss for the second quarter of 2019 was $3.9 million, or $0.09 per share, compared to a net loss of $3.1 million, or $0.08 per share, in the second quarter of 2018. R&D expenses for the second quarter of 2019 were $1.5 million, compared to $1.4 million for the second quarter of 2018. The increase was due to higher stock-based compensation offset by lower clinical trial expenses. G&A expenses were $2.7 million for the second quarter of 2019 compared to $2.0 million for the second quarter of 2018. The increase was primarily due to higher stock-based compensation.
Total operating cash burn for the second quarter of 2019 was approximately $1.6 million and the company exited the second quarter of 2019 with approximately $61.7 million in cash and cash equivalents. As of July 24, 2019, MediciNova had approximately 43.2 million shares of common stock outstanding and when factoring in the approximately 6.8 million stock options a fully diluted share count of 50.1 million.
MN-001 Research Collaboration
On July 30, 2019, MediciNova announced the initiation of a comprehensive research collaboration with the Japanese National Cerebral and Cardiovascular Disease Research Center, Division of Lipid Metabolism, Department of Molecular Innovation in Lipidology. The purpose of the collaboration is to further understand the mechanism by which MN-001 alters lipid metabolism.
In 2018, MediciNova announced the presentation of positive results from the company’s Phase 2 clinical trial of MN-001 (tipelukast) in patients with non-alcoholic steatohepatitis (NASH) and non-alcoholic fatty liver disease (NAFLD) at the 53rd annual meeting of the European Association for the Study of the Liver (EASL).
A total of 15 patients completed eight weeks of treatment with MN-001 (four weeks at 250 mg/day and four weeks at 500 mg/day), and MN-001 reduced serum triglyceride levels in 14/15 subjects. The average pre-treatment serum triglyceride level was 328.6 mg/dL, which was reduced to an average 192.9 mg/dL following eight weeks of treatment (-41.3%, P=0.02). The company also analyzed the data excluding an outlier subject that had an extremely high serum triglyceride level of 1288 mg/dL prior to treatment that was reduced to 300 mg/dL after treatment. That analysis showed 13/14 subjects with a reduction in serum triglycerides, from an average 260.1 mg/dL prior to treatment to an average 185.2 mg/dL following treatment (-28.8%, P=0.00006). Importantly, there were no clinically significant safety or tolerability issues during the study.
Presentation at International Symposium on ALS/MND
On July 29, 2019, MediciNova announced that the company’s Chief Medical Officer, Dr. Kazuko Matsuda, will present an abstract entitled “Interaction (nonuniformity) of ALS Progression and the Efficacy of MN-166 (ibudilast)” at the 30th International Symposium on ALS/MND (amyotrophic lateral sclerosis/motor neurone disease) that is being held Dec. 4-6, 2019 in Perth, Australia. Details of the presentation will be released at a later date.
Planning for a Phase 3 Trial in Progressive Multiple Sclerosis
In July 2019, MediciNova announced plans for a Phase 3 clinical trial for MN-166 (ibudilast) in progressive multiple sclerosis (MS) following feedback received from the U.S. Food and Drug Administration (FDA). The company is planning to conduct a single Phase 3 trial in patients with secondary progressive MS (SPMS) without relapses with the primary endpoint being the time to 3-month confirmed disability progression as measured by Expanded Disability Status Scale (EDSS). The EDSS is the ‘gold standard’ for assessing disability progression in patients with MS (Kurtzke, 1983). The EDSS consists of 19 disease steps on a scale between 0 and 10 and measures impairment or activity limitation in eight functional systems along with ambulation. The most commonly used method for determining disability progression is through repeat measurements of EDSS.
We believe there is ample justification for the company’s decisions for each of the three main points of the trial:
1) A single Phase 3 trial to support a regulatory filing for MN-166 in SPMS. The FDA has recently approved two new therapies for the treatment of relapsing forms of MS (including RRMS and relapsing SPMS) and SPMS with relapses. Mayzent® (siponimod) was approved for SPMS with relapses based on the results of the EXPAND Phase 3 clinical trial (Kappos et al., 2018). Mavenclad® (cladribine) was approved for relapsing forms of MS based on the results of a 2010 Phase 3 clinical trial (Giovannoni et al., 2010). Thus, we believe that positive results from a single Phase 3 trial will suffice to support an NDA for MN-166 in SPMS patients without relapses.
2) Focusing on SPMS patients without relapse. In April 2019, MediciNova announced the results of a subgroup analysis of the Phase 2b SPRINT-MS trial of MN-166 in patients with progressive MS. The subgroup analysis performed was done to better understand which type of progressive MS responds best to treatment with MN-166 in regards to confirmed disability progression as measured by EDSS. The following table shows that the greatest treatment effect for MN-166 occurred in patients with SPMS without relapse, as demonstrated by a 46% risk reduction and a hazard ratio of 0.538.
View Exhibit I
There are only three drugs currently approved for the treatment of progressive MS. Ocrevus® is only approved for PPMS while Mayzent® and Mavenclad® are approved for both RRMS and SPMS with relapse, while no medications are currently approved for the treatment of SPMS without relapses.
3) Primary endpoint will be the time to 3-month confirmed disability progression as measured by EDSS. The primary endpoints in the Phase 3 clinical trials for Mayzent® and Ocrevus® was the time to 3-month confirmed disability progression as measured by EDSS. The Phase 3 trial for Mavenclad® used that endpoint as a secondary outcome. Based upon this, the FDA agreed that it was an acceptable primary endpoint for a Phase 3 trial of MN-166 in SPMS patients without relapse.
Full details of the Phase 3 clinical trial protocol of MN-166 in SPMS patients without relapse will be finalized soon as the company prepares for an ‘end-of-Phase 2’ meeting with FDA later this year. We anticipate learning additional details about the trial following that meeting and for the trial to initiate in early 2020.
How MN-166 Compares to Other Progressive MS Treatments
We believe that the data presented thus far for MN-166 from the Phase 2b clinical trial compare quite favorably to the data presented for both ocrelizumab and siponimod, potentially making MN-166 a best in disease treatment for patients with both primary and secondary MS, as shown in the following table. Treatment with MN-166 results in a 46% reduction in disability progression in SPMS patients without relapse, compared to siponimod’s study which showed only a 13% reduction in disability progression in SPMS patients without relapse (and a 21% reduction for all SPMS subjects) in those treated with siponimod (Mayzent® prescribing information). The weak trend shown by siponimod in SPMS patients without relapse is the reason the FDA limited its approved indication to relapsing SPMS.
View Exhibit II
In addition to exhibiting better efficacy than already approved products, MN-166 had a very favorable safety and tolerability profile as shown by no increases in serious adverse events and no safety signals. In contrast to the excellent safety profile for MN-166, treatment with ocrelizumab resulted in an increase in malignancies, serious infusion reactions, and infections, while treatment with siponimod increased infections, bradyarrhythmias, macular edema, respiratory effects, liver injury, increased blood pressure, and fetal risk. We don’t believe that Mavenclad® will ever command more than 1-2% of the total market for SPMS with relapses due to a black box warning about an increased risk of malignancies.
View Exhibit III
How Large is the SPMS Without Relapse Market?
Three recent papers in the journal Neurology attempted to accurately estimate the prevalence of MS in the U.S. (Nelson et al., 2019; Culpepper et al., 2019; Wallin et al., 2019). The methodology described in those papers resulted in an estimate of approximately 700,000 individuals in the U.S. with MS. Up until then, most estimates of the number of individuals in the U.S. with MS suggested there were approximately 300,000 to 400,000 (Dilokthornsakul et al., 2016). While the new, larger estimate is certainly interesting, we will continue to use what we view as a more conservative estimate of 400,000 MS patients in the U.S., which we believe is supported by total sales of MS drugs (discussed below).
Of the patients diagnosed with MS, approximately 85% will be initially diagnosed with RRMS while approximately 15% will be diagnosed with primary progressive MS (PPMS). Of those diagnosed with RRMS, we estimate that at least 50% of them will go on to develop SPMS, although over a longer period of time (20+ years) that number may be much higher. Of those with SPMS, we estimate that approximately 20% will have relapses (based on a 19% rate of relapse in placebo patients in the Mayzent® Phase 3 clinical trial). Based on a total of 400,000 MS patients in the US, this represents a potential market of >130,000 patients with SPMS without relapse.
According to EvaluatePharma, the MS market was approximately $23 billion in 2018. The following table shows the leading MS drugs according to 2018 worldwide sales. Tecfidera® was the highest-grossing MS drug in 2018 with approximately $4.3 billion in sales out of a total of 18 drugs available to treat those with RRMS. While there are a large number of drugs available for patients with RRMS, as previously mentioned there are only three drugs currently approved for treating progressive MS: Ocrevus® (only approved for PPMS), Mayzent® (approved for RRMS and SPMS with relapse), and Mavenclad® (approved for RRMS and SPMS with relapse), and none that are approved for treating SPMS without relapses.
View Exhibit IV
Valuation and Conclusion
Based upon an analysis of the MS market, we have recently adjusted our valuation for MediciNova. We continue to use an estimate for a total number of MS patients in the US of 400,000 based upon total sales of MS drugs in the U.S. Based on $23 billion in sales in 2018 and 300,000 MS patients being treated, that works out to approximately $76,667 per patient per year, which is fairly close to estimated yearly costs for MS drugs (Hartung et al., 2015; Managed Care).
If MN-166 is approved for the treatment of SPMS without relapse, it will be the only drug available for that condition. Tecfidera®, with sales of $4.3 billion in 2018, is a good example of the type of revenues that a safe and successful MS drug can generate (and that is in a very crowded market with 18 approved drugs), thus we now estimate $5 billion in peak worldwide sales is achievable for MN-166 for SPMS without relapse.
We believe MediciNova is ready to move ahead with the Phase 3 trial on its own, however partnering discussions are likely going on in the background. Partnering for a Phase 3 trial is certainly not a requirement for a smaller biotech company, for example both TG Therapeutics (TGTX) and Atara Biotherapeutics (ATRA) are conducting Phase 3 trials in MS without a larger biopharma partner. In addition, Receptos, Inc. was conducting two Phase 3 clinical trials in RRMS on its own when it was acquired by Celgene in 2015 for $7.4 billion. We believe the data compiled for MN-166 fully supports the initiation of a Phase 3 program and that even if no partnership is established prior to initiation of the Phase 3 trial that does not preclude one occurring during the trial or after the trial’s conclusion.
We estimate the Phase 3 clinical trial for MN-166 in MS will begin in 2020 and approval will be in 2024, with peak sales of $5 billion approximately seven years after launch. Based on a 65% probability of approval and using a 15% discount rate, MN-166 in SPMS has a net present value of approximately $600 million. Based on this our valuation for MediciNova is currently $22.
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