MediciNova's Ibudilast And The Phase IIb Trial Offer Steady Outlook

| About: MediciNova, Inc. (MNOV)

Summary

Promising pipeline offers attractive value.

Mid-year catalyst provides ideal entry-timing for mid-term investors.

Experienced/academic management, cost-conscious drug development, and high cash reserves offer further assurances.

Recent news

Recent news surrounding Medicinova's (NASDAQ:MNOV) progress has concerned its drug MN-166, or ibudilast, and its treatment of ALS, commonly known as Lou Gehrig's disease. On December 13, the company released interim data and announced that the trial is meeting its primary endpoints: safety and tolerability. However, the secondary endpoints (which included efficacy measures of functional activity and non-invasive ventilation, as well as two others), showed no statistical significance in treatment versus placebo. CEO Yuichi Iwaki stated: "We are very pleased with the encouraging interim data, particularly the slow vital capacity and NIV utilization data which may indicate that MN-166 has potential to improve respiratory function in ALS patients." He did not state how treatment efficacy could be expected to improve. The trial will continue for six months.

Shortly afterwards, on December 16, the FDA stamped their approval of Fast Track status for the drug in treatment of ALS. This designation, heralded a month ago, has gone largely unnoticed, because the stock itself is under-covered. Only Zacks Small Cap and Ladenberg Thalm cover the stock. Both rate it "Strong Buy." The following are reasons why the stock is under-recognized:

  • A tiny market cap (~$100 million)
  • Only two drugs in development
  • No drugs in phase III
  • No operating revenue
  • Only 40,000 shares traded on average per day

But Fast Track status allows "frequent interactions with the FDA review team and a rolling review of the New Drug Application (NDA)." This assurance is a stamp of faith from the FDA, and it will increase the significance of upcoming announcements from MediciNova.

Catalyst

The most-expected catalyst in the near-future for the company is completion of the phase IIb ALS trial. Regardless of secondary endpoints, the primary endpoint will most probably be achieved. The big (long-shot) question is whether the drug will prove effective as well as safe. Because the drug is Fast Tracked, progress toward a phase III trial could occur "quickly," if the results are desireable. Such a move would be a powerful catalyst. In the near-term, there are very few risks for shareholders in terms of unexpected news. Three major reasons are as follows:

  • Ibudilast has been marketed in Japan for 20 years (Rolan et al., 2009)
  • Much of the company's studies are being conducted by government organizations
  • Ibudilast's phase II trial for Multiple Sclerosis is funded by the National Institutes of Health and run by NeuroNEXT (Napodano, 2015).

Other assurances

In addition to the stated advantages of being largely undiscovered and on-track for progress, if not success, it has many features of a desirable high-reward venture. The company's 10Q states that it has enough cash to fund operations through December 31, 2017-$23,612,272 in cash as of September 30, 2015. It also has an open at-the-market issuance sales agreement with MLV & Co. LLC (MLV), good for $30 million in shares issued. I see this financing as both a positive and a negative. I prefer direct financing to that of PIPES. It assures me that although the company is under-recognized, a higher share price is in everyone's best interest.

Three reasons to trust the company:

  • The previous issuance did not result in a negative price performance
  • The CEO is a reputable executive and academic, having published 200 articles and 40 books
  • He is currently professor in three of USC's School of Medicine departments: "Urology, Surgery and Pathology, and has been Director of the Transplantation Immunology and Immunogenetic Laboratory since 1992."

Conclusion

As Napadano and Bautz wrote in their previously cited Seeking Alpha article, MediciNova's Deep Pipeline Is Meaningfully Undervalued, the likelihood of ibudilast becoming approved for ALS is small-10% according to their estimates. For MS, the expected chance of success is better, 33%. The company's other drug, MN-001, has shown positive results in the treatment of drug addictions such as: methamphetamine, opioids (including heroin and prescription pain medication), and alcohol. It is also expected to begin phase II trials for the treatment of NASH and IPF.

Steadily developing its pipeline while coordinating funding and testing through respected agencies, MediciNova currently offers a high reward potential for biotech investors. Many potential price-moving catalysts can be expected. Aside from the completion of the phase IIb trial for ALS, the company should begin MN-001 in phase II trials for the treatment of NASH and IPF. The NASH study has been granted Fast Track status, and the drug's application for IPF has is designated as an Orphan Drug, increasing their chances of timely design and completion. MediciNova is managing its resources conservatively while progressing towards the possibility of meaningful success. The company's small size and "developmental" status enhance the investment opportunity.

Disclaimer: Perform your own due diligence. I am not an investment advisor.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in MNOV over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.