MyoKardia: Does This Small Biotech Stock Belong On Your 'Buy' List?

| About: MyoKardia (MYOK)

Summary

Today, we look at MyoKardia, an interesting small-cap biotech play that has been public right around 18 months now.

The company is well funded at the moment, has a strategic development partnership with a large drug giant and multiple 'shots on goal'.

Is this cardiovascular play worthy of inclusion into your well-diversified biotech portfolio? We take a deeper look below.

"It is easy to be conspicuously 'compassionate' if others are being forced to pay the cost."

― Murray N. Rothbard

Murray N. Rothbard

I have gotten two inquiries this week from real-time followers on a small-cap biotech concern that is just past its 18-month mark as being a public company. Since the shares trade almost exactly where they did one month ago when I did an exclusive 'first look' piece on them on the Biotech Forum, I thought for this weekend I would post that analysis for the regular Seeking Alpha community

May 17th article:

Today, we take an exclusive first look at a small biotech concern that is in one of my favorite niches (a company that has been public for 18 months to 5 years) and is down significantly from all-time highs but has been on the mend as its pipeline continues to develop.

Company Overview:

With a market capitalization nearing $450 million, shares of MyoKardia (NASDAQ:MYOK) have risen almost 20% over the past year. At one point, shares virtually doubled due to excitement about initial data for lead product candidate MYK-461 for the treatment of hypertrophic cardiomyopathy {HCM}. With shares having formed a solid double bottom at the $11 mark, it appears they are trying to base for a potential break higher.

Founded in 2012 by Third Rock Ventures, the small biotech firm has the ambitious goal of becoming the world's leading precision cardiovascular medicines company. Their clinical candidates are designed to correct underlying causal effects of targeted indications, while they've also managed to create the world's leading cardiomyopathy registry (SHARE) consisting of eleven centers and over ten thousand patients. The registry has aided the company in understanding the role of genetic mutations in the natural history of disease, as well as identify subdomains of proteins that could lead to potential therapeutic targets.

Pipeline:

Management is focused on the progression of lead candidate MYK-461 through mid-stage trials, while their second asset MYK-491 is in early stage studies. Both drug candidates are partnered with Sanofi (NYSE:SNY) along with a third preclinical program, while other wholly-owned assets are still in the process of target validation. Sanofi recently triggered a $45 million milestone payment to the company when they chose to continue their partnership with Myokardia, but it should be noted that the smaller company has managed to retain US commercial rights to MYK-461 and HCM-2, while also possessing co-promotion rights to MYK-491.

While the total heart failure population in the United States consists of around 6 million patients or so, management has chosen to target smaller though still substantial segments. The initial indication for MYK-461 is symptomatic, obstructive HCM (hypertrophic cardiomyopathy). The company's Chief Medical Officer indicated that recently published data estimates there are 100,00 Americans diagnosed and seeking treatment, with 50% to 70% of these displaying significant LVOT obstruction.

The condition is associated with symptoms such as shortness of breath, dizziness, fainting, and chest pain, while risk of atrial fibrillation leading to stroke or arrhythmias causing sudden cardiac death is greatly increased. There are no approved drug therapies for the indication, with the current standard of care being off label drugs or surgical procedures.

MYK-461 is a small molecule created to reduce left ventricular contractility through modifying the function of cardiac myosin. Early data has been promising, with repeat doses of MYK-461 being tolerated for up to 28 days in healthy volunteers and dose-dependent reductions in contractility suggestive of a meaningful clinical benefit.

Dose dependent effect observed with administration of MYK-461 in single ascending dose trial

Also observed in the trial, two patients with LVOT obstruction were enrolled and treated with a single 96 mg dose, resulting in significant reductions in LVOT gradients for both patients that was consistent with a prior hypothesis that reduction in contractility would lead to reducing outflow tract gradients.

Topline data for the PIONEER-HCM study is due in the third quarter and should help management to gain experience with the drug in an outpatient setting, as well as provide confirmatory information from assessing the level of reduction in LVOT gradient. Management has guided that a 10% to 15% change in pVO2 would be needed to achieve symptomatic improvement.

The other phase 2 trial, EXPLORER-HCM, will be initiated in the second half of the year with the goal of enrolling 60 to 100 patients. Patients will not be required to stop taking beta blockers as in the prior study, as management expects that MYK-461 would be utilized on top of this medication.

Development Pathway

MYK-491 is a novel cardiac myosin activator designed to treat the underlying cause of dilated cardiomyopathy {DCM}, an awful condition involving improper contraction and insufficient blood being pumped by the heart resulting in chronic, progressive heart failure that can greatly decrease life span. Patients often experience shortness of breath, fatigue, and chest pain, while risk of sudden cardiac death and/or heart transplant is greatly increased.

MYK-491 works by restoring cardiac output and directly targeting sarcomere mutations which result in underpowered contraction. Management's goal is to initially improve patient symptoms, with preclinical data in a dog model of showing restored heart function without impairing relaxation. An ongoing phase 1 single ascending dose trial is scheduled to have topline results readout in the third quarter, while a multiple ascending dose trial will be initiated in the second half of the year. Of the 900,000 patients in the United States estimated to fall into the idiopathic dilated cardiomyopathy segment, those with genetic DCM being initially targeted amount to around 360,000.

Analyst Commentary & Balance Sheet:

On May 9th, the company reported a first-quarter cash balance of $135.6 million, while net loss for the quarter amounted to $11.5 million. Research and development expenses rose by almost half over the same quarter last year due to ongoing clinical activities. Also noteworthy, the company managed to add three new members to their board of directors, including Dr. David Meeker (currently executive vice president and head of Sanofi Genzyme), Kim Popovits (chairman of Genomic Health's Board), and Wendy Yarno (retired chief marketing officer of Merck). Executive lineup was strengthened through the hiring of Dr. Marc Semigran as Chief Medical Officer, who previously led the heart failure and cardiac transplant program at Massachusetts General Hospital and was principal investigator of the Harvard Regional Clinical Center of the National Heart Lung and Blood Institute heart failure network.

The stock appears to be relatively underfollowed by analysts - not surprising given its length as a public company. The current median price target by the four analysts that have ratings on the stock is $30 a share. A top ranked (TipRanks) analyst at Cowen & Co. was the last to provide analyst commentary on this small cap name. He reiterated his Buy rating and $28 price target on March 11th.

Outlook:

Although just on our radar, and not quite yet "Holding Pen" material, I think the purchase of few shares at current levels and placement on a 'watch list' pending further developments is merited for MyoKardia. The company is past the 18-month threshold, has a significant partnership with a major drug company, has multiple shots on goal and is well-funded at the moment.

"A socialist is just someone who is unable to get over his or her astonishment that most people who have lived and died have spent lives of wretched, fruitless, unremitting toil." ― Terry Eagleton

Author's Note: I am happy to be a part of the 2nd DIY Online Investment Summit that will run June 27th through June 28th. I will be one of nine top SA contributors, including Brad Thomas, Eric Parnell and Ian Bezek, giving their investment views and stock picks for the second half of 2017. Over 10 hours of interviews will be available to registrants. Best of all, it is free to all that register HERE.

Thank You and Happy Hunting

Bret Jensen

Founder, Biotech Forum

Disclosure: I am/we are long MYOK.

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.

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