Minerva Neurosciences, Inc. (NASDAQ:NERV) is a biotech company developing treatments for central nervous system diseases. The stock has steadily traded down since November 2016 despite the fact that the company has multiple promising candidates in its pipeline.
MIN-101: A drug with huge potential in schizophrenia
MIN-101, the company's lead candidate, is being developed for the treatment of schizophrenia and has positive results from phase 2 studies. Results from a randomized, double-blind, placebo-controlled phase 2b trial provided encouraging validation for the efficacy of the drug in treating the negative and cognitive symptoms in schizophrenia. The core part of the phase 2b study was 12 weeks in length although following this patients in the placebo arm of the study were crossed over to MIN-101 to further display the efficacy of the drug and collect more safety data (Figure 1).
Figure 1: Schematic of the phase 2b trial of MIN-101. The encircled R denotes randomization following which treatment begins.
Source: Corporate presentation from March 2017.
One of the major advantages of the mechanism of action of MIN-101 is that the drug does not directly block dopamine receptors unlike conventional antipsychotics. Instead the drug is an antagonist of 5-HT2A receptors and sigma-2 receptors. The blockade of dopamine receptors by conventional antipsychotics such as haloperidol is responsible for extrapyramidal symptoms (side effects which include muscle spasms, Parkinson's disease-like rigidity and tremor). Newer atypical antipsychotics such as olanzapine were hoped to treat schizophrenia without producing extrapyramidal symptoms or at least produce these side-effect less often. Indeed atypical antipsychotics have at least somewhat met these expectations; however, they have failed to be entirely devoid of the potential to induce extrapyramidal symptoms. Regarding the efficacy of currently available antipsychotics, both typical and atypical antipsychotics are able to treat the positive symptoms of schizophrenia such as hallucinations and delusions. Neither class of antipsychotic appears to result in a clinically meaningful reduction in the negative symptoms of schizophrenia (for example avolition and social withdrawal). MIN-101 certainly has the potential to add to the treatment of schizophrenia since the drug hit the primary endpoint in the phase 2b study, thus showing a benefit in treating the negative symptoms of schizophrenia (Figure 2).
Figure 2: Comparison of MIN-101 to placebo in terms of reduction in negative symptoms as measured using the Negative Symptom Score from the Positive and Negative Syndrome Scale (PANSS).
Source: Corporate presentation from March 2017.
The extension phase of the study showed that benefits seen during the first 12 weeks of the study continue to accumulate over time. Patients originally assigned to placebo also appear to receive some benefit from switching to MIN-101 (the extension phase did not include a placebo arm, so statistical significance cannot be established relative to placebo).
Figure 3: Full data from the phase 2b study of MIN-101 in schizophrenia in terms of the Negative symptoms score of the PANSS.
Source: Corporate Presentation from March 2017.
It should be noted that the data in these placebo patients switched to MIN-101 does appear less impressive compared to the data seen in the core part of the phase 2b study. Note how the left half of the graph in Figure 3 concerns 12 weeks of data, whereas the right half of the graph has 24 weeks of data (the graph has been distorted). The slope of the red and green lines then (placebo patients crossed over to MIN-101) would appear less steep than perhaps even the black placebo line if the graph were not distorted. This might suggest that NERV was somewhat lucky in the core phase of this study and perhaps the placebo patients were just hard to treat (exaggerating the effect of the drug). You can also see that the dark blue line (the 32 mg of MIN-101) crosses below the light blue line (64 mg dose) during the extension phase, suggesting the dose-response relationship has been lost. This is also concerning since the 64 mg dose previously appeared superior to the 32 mg dose on the majority of endpoints. A dose-response relationship is usually considered as a good piece of evidence that a drug actually works and that the results of a clinical trial are not due to chance.
Looking at a secondary endpoint in the trial, also designed to assess negative symptoms, the data from the extension phase of the study look particularly worrying; the placebo patients crossed over to MIN-101 seem to barely improve from week 18 to week 24 (six weeks of treatment) (Figure 4). Compare this to what is seen over six weeks of treatment with MIN-101 in the core part of the study. Perhaps it is this data from the extension phase of the MIN-101 study which has caused NERV to gradually sell off.
Figure 4: The BNSS was one of the secondary endpoints in the core part of the study. The 64 mg group beat placebo at 12 weeks. The data on this scale look less impressive during the extension phase of the phase 2b study.
Source: Slide deck associated with October 26, 2016, press release.
Overall, I do not think we should read into the data from the open phase of the study too much, which means my viewpoint likely differs from that of the market (which appears not to have liked the data too much). Firstly, the extension phase of the study was open label, and so the change in negative symptoms in patients crossed over from placebo cannot be compared directly to the placebo response obtained in the double-blind phase of the phase 2b trial. Secondly, the number of patients in the extension phase of the study compromises the interpretation of the study. Of 83 placebo patients in the core phase of the study, 39 did not proceed to the extension phase. This means the red and green lines in the above figures come from at most 44 patients. In fact by the end of the study, the placebo to MIN-101 patients comprised 28 patients in total (Table 1). You can see also that many patients who were treated with MIN-101 in the core phase of the study either did not enter the extension phase or dropped out (only 60 were left in total after 36 weeks).
Table 1: Patient disposition in the phase 2b study. The superscripts 1, 2 refer to placebo patients who did not and did participate in the extension phase of the study respectively.
Source: Slide deck associated with October 26, 2016, press release.
Overall, I feel investors may have scrutinized the data from the extension portion of the study too much. The totality of the data with MIN-101 suggests the drug will provide a benefit to patients with schizophrenia. Further, other 5-HT2A antagonists/inverse agonists have also shown some efficacy in treating schizophrenia such as Sanofi's (NYSE:SNY) eplivanserin and Acadia Pharmaceuticals' (NASDAQ:ACAD) pimavanserin. While Sanofi aborted development of eplivanserin, ACAD has begun a phase 2 trial with pimavanserin in schizophrenia (targeting negative symptoms) and a phase 3 study (targeting inadequate response to conventional antipsychotic schizophrenia. ACAD expects its studies of pimavanserin in schizophrenia to complete in June 2019 (ADVANCE, the phase 2 study) and January 2019 (ENHANCE-1, the phase 3 study). It is unclear if NERV will be able to beat ACAD to the punch in producing phase 3 data in schizophrenia.
Does MIN-101 deliver on safety?
The company has noted MIN-101 to be well tolerated with side effects not differing significantly from placebo. MIN-101 or one of its metabolites does prolong the QT interval, which means that the drug has the potential to cause arrhythmia like ACAD's pimavanserin. In the development of MIN-101, however, NERV developed a formulation of the drug which minimizes formation of this metabolite and so the potential of the drug to cause arrhythmia has been substantially attenuated. It is unclear whether MIN-101 would garner a black box warning for prolongation of the QT interval if approved. In the first 12 weeks of the phase 2b trial of MIN-101, two of 162 patients receiving MIN-101 were discontinued due to prolongation of the QT interval. It appears there were another four occurrences of QT prolongation during the extension phase of the trial since final safety data notes six cases of QT prolongation. All of these cases occurred in the 64 mg arm of the trial. ACAD's pimavanserin includes a warning regarding QT interval prolongation, but it is not a black box warning and so the effect on prescribing is limited.
Was there a phase 2a trial of MIN-101 in schizophrenia?
In 2010, a private company called Cyrenaic Pharmaceuticals, Inc. reported positive results from a phase 2a trial of CYR-101 in the treatment of schizophrenia. CYR-101 went on to be known as MIN-101. The phase 2a study was a double-blind, placebo-controlled, randomized study in 100 patients with schizophrenia or schizoaffective disorders. Cyrenaic noted that the drug performed particularly well with regard to the negative symptoms of schizophrenia. This press release from Cyrenaic also noted that the drug had a benign safety profile which was consistent with four previously completed phase 1 studies. In 2013, Cyrenaic merged with Sonkei Pharmaceuticals, Inc. to form Minerva Neurosciences, Inc.; the company conducted an IPO in 2014. NERV does not talk too often about the results from this phase 2a study although an S-1 filing (page 2) prior to the IPO reports that the benefit of MIN-101/CYR-101 in the phase 2a study was statistically significant with regards to negative symptoms.
The phase 3 program for MIN-101
The company plans to initiate the phase 3 program for MIN-101 in schizophrenia in the second half of 2017 now that the end of phase 2 meeting with the FDA has been conducted. The phase 3 trial will be a 12-week, double-blind, placebo-controlled, randomized study testing two doses of MIN-101 in schizophrenia patients experiencing negative symptoms. The company plans to enroll 500 patients across 60 sites in the US and Europe. The company notes that the overall design will be similar to the phase 2b study. Investors should pay attention for any information regarding the rate of enrollment of the study in future press releases and during the quarterly earnings calls.
MIN-202: Potential for insomnia and depression with insomnia
MIN-202 is being developed for insomnia in patients without a comorbid psychiatric illness (primary insomnia) but also patients with depressive disorders who have comorbid insomnia. The compound is in fact under joint development by NERV and Janssen Pharmaceutica NV and is a selective antagonist of the orexin type 2 receptor. Antagonists of orexin receptors can be thought of as opposing wakefulness. A non-selective antagonist of orexin receptors (antagonist at both orexin type 1 and 2 receptors) is currently marketed by Merck (NYSE:MRK) as Belsomra. NERV produced positive data with MIN-202 from a phase 2a placebo-controlled, double-blind study in 28 primary insomnia patients in January 2016. MIN-202 hit the primary endpoint (sleep efficiency) at the 40 mg dose (Figure 5).
Figure 5: Sleep efficiency in the phase 2a study of MIN-202 (JNJ-42847922) in patients with insomnia. Formula for sleep efficiency is shown. PSG refers to polysomnography, a measurement of brain waves, eye movements, muscle activity and heart rhythm used to asses sleep.
Source: Corporate Presentation from March 2017.
A placebo-controlled, double-blind phase 1b study of MIN-202 in 48 patients with major depressive disorder noted benefits on mood independent from the benefit on sleep. It will be interesting to see how NERV plans future trials of MIN-202 to show off the benefits of the drug on sleep and on depression. With so many drugs available in the depression space, any company looking to enter the market needs to develop a differentiated product. In a large 2010 study of 3,743 patients with major depressive disorder, 84.7 percent of patients were also shown to have insomnia symptoms. An antidepressant with a label specifying treatment in depressed individuals with comorbid insomnia might have a marketing edge over other antidepressants in the space without applying to only a small subset of patients. MIN-202 certainly has a differentiated mechanism of action from currently available antidepressants. MRK is also running a phase 4 study of Belsomra investigating the effect of the drug on sleep and depressive symptoms in patients with major depressive disorder and so represents a competitor to NERV.
Additional phase 2 trials for MIN-202 are in planning for commencement in the second half of 2017 for both insomnia and major depressive disorder.
MIN-117: A drug for depression with reduced side effects
MIN-117 is another compound aimed at treating depression in NERV's pipeline although there is no specific focus on insomnia. The drug has a multi-modal mechanism of action but inhibits the reuptake of serotonin like conventional antidepressants, and so it is unsurprising that the drug produced positive results in a phase 2a trial in depressed patients. The phase 2a study of MIN-117 was a placebo-controlled, double-blind study which tested two doses of MIN-117 and also included the conventional antidepressant paroxetine as a comparator. The drug did not appear to be more effective than paroxetine according to a graphical representation of the data.
Figure 6: Change from baseline in the Montgomery-Asberg Depression Rating Scale (MADRS). Note that paroxetine appears to outperform placebo by a greater margin than MIN-117.
Source: Poster presentation of MIN-117 data at the American College of Neuropsychopharmacology conference in December 2016.
The company noted however that the drug was superior to paroxetine in terms of the number of patients achieving a 50 percent reduction in MADRS score. I suppose I should argue that we should not pay too much attention to the magnitude of difference between paroxetine and MIN-117 at this early stage. Certainly the finding that MIN-117 was not associated with sexual dysfunction, suicidal ideation, weight gain or cognitive impairment is encouraging. These side effects are an issue with many other antidepressants. For example, most selective serotonin reuptake inhibitors including paroxetine are associated with sexual dysfunction such as a reduction in libido. Nonetheless I do not find the data in figure 6 to be highly encouraging, so I would like to see vital resources put towards the other drugs in NERV's pipeline and see development of MIN-117 slightly deprioritized. The company notes that it expects to begin trials in the second half of 2017. The drug has beat placebo before so it has a good chance of doing so again in phase 2b trials in major depressive disorder.
MIN-301: A drug for Parkinson's disease
The last compound in the company's pipeline is MIN-301. The drug has a novel mechanism of action targeting the ErbB4 receptor which the company hopes may benefit patients with Parkinson's disease. The compound is still at the preclinical stage with the company noting on the Q1 earnings call that it intends to file an IND in the US and an IMPD in Europe which will allow it to move into phase 1 studies.
MIN-301 works by an as of yet untested mechanism of action, so any prediction regarding its efficacy would be premature. I will note however that initial phase 1 studies will simply examine the pharmacokinetics of the drug, mainly the rate of metabolism and perhaps the distribution of the drug throughout the body including hopefully within the brain. While the company has likely already done the preclinical work necessary to ensure the drug will be sufficiently metabolically stable, whether or not the drug will effectively penetrate the central nervous system in humans will be harder to predict, particularly since the drug is a recombinant protein, not a small molecule drug. Investors should keep an eye on this as the data from the phase 1 program is released. The success rate in Parkinson's disease is not high and a drug that doesn't even penetrate the CNS to a good extent is not really a plausible Parkinson's disease candidate. It is worth noting that over the past decade the knowledge of how to develop CNS penetrant proteins (particularly antibodies but also other proteins) has increased, partly due to the development of the antibodies developed for Alzheimer's disease.
The financial position
Cash burn in Q1'17 was $10.6 million. The company had $85.4 million in cash, equivalents and marketable securities as of March 31, 2017. Given the current cash burn rate, we can see that cash could potentially last eight quarters (two years) although this assumes no increase in the burn rate. An increase in the burn rate does seem likely given the larger phase 3 studies that will begin with MIN-101 this year and the progress of the other candidates in the pipeline (MIN-202, MIN-117 and MIN-301). Perhaps for this reason NERV guided on the Q1'17 earnings call that cash on hand should be sufficient for at least 12 months.
Unfortunately, the next few months will be quiet in terms of results for NERV. While the initiation of the phase 3 program for MIN-101, new mid-stage trials for MIN-202 and MIN-117 represent important milestones, investors in biotech flock to stocks with upcoming data releases. The possibility certainly exists of a partnership announcement or even buyout offer, but I rarely recommend buying a stock and waiting around for a partnership or buyout.
I recommend a long position in NERV despite the current lack of near-term readouts from clinical trials since the stock will likely begin to run up prior to these readouts. The pipeline of the company is simply too promising, particularly MIN-101 and MIN-202, to not recommend a long position given that the current market cap is just over $300 million. Investors might wait for a slight pullback this week (beginning May 15) since the stock has experienced quite a spike the past few trading sessions. It certainly seems the stock might have found the bottom though after six months of downside and the upside might be steep from here on. Investors need to be aware that holding through the outcome of clinical trials can expose them to large downside. NERV might decide to raise cash soon for all those clinical trials it plans to initiate in the second half of 2017 even though current cash is sufficient for 12 months.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within 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.