"'Tis a lesson you should heed:
Try, try, try again.
If at first you don't succeed,
Try, try, try again."
- Proverb originating from the writings of Thomas Palmer and popularized by William Hickson
Ganaxolone: The Comeback Kid of Neurosteroids?
Recently, I profiled Sage Therapeutics (NASDAQ:SAGE) including its neurosteroids, brexanolone and Sage-217. This is a part of my ongoing series of articles about companies with antidepressant compounds. It is a natural move to go from focusing on brexanolone to adding a carbon and 3 hydrogens and discussing ganaxolone by Marinus (NASDAQ:MRNS). To understand how close these compounds are, we will play the game "Can you spot the difference?" (Image sources: Pubchem).
Yes, the only difference is the "little line" at the bottom left that ganaxolone has and brexanolone does not. That "little line" is a CH3 group (one carbon, 3 hydrogens). Altum Research has written an outstanding article that includes the ramifications of this extra methyl group with regards to structural chemistry.
Both ganaxolone and brexanolone have had their issues - particularly with regards to failed studies in seizures. Specifically for ganaxolone, Marinus suffered a Phase 3 failure in drug-resistant Adult Focal Onset Seizures. Clinically, this is a very difficult group to treat as it by definition has failed previous anticonvulsants and each failure generally increases the risk of subsequent trials also being failures. This is generally true even when subsequent trials are of anticonvulsants from a different class. Interestingly, the same pattern holds true for several other areas often labeled as "drug resistant" or "treatment resistant." This includes treatment-resistant depression and drug-resistant infections. This is one of the reasons that many neuroscience medications that fail in one indication are not discarded, but instead tried in other areas. Companies are seeking differentiation and improvement from currently available treatments in most cases. With many generics available in the antidepressant, anticonvulsant, and antibiotic spaces, there is no real benefit for a new compound to be "as good as" a generic. Instead, companies must find at least some area (like treatment resistance) where a drug can perform "better" than a generic. Unfortunately, drug-resistant Adult Focal Onset Seizures were not that area for ganaxolone.
Fortunately, the leaders at Marinus apparently listened to their grandmothers' voices in the back of their heads saying "if at first you don't succeed, try, try, try again." Marinus has certainly followed this philosophy (as has Sage) in testing its neurosteroid in additional areas. To date, Marinus has tested ganaxolone (at least to some degree) in all of the following:
- Drug Resistant Adult Focal Onset Seizures (to Phase 3, failed)
- Infantile Spasms (to Phase 2, never reported results)
- Add-On Therapy for Drug-Resistant Adult Partial Complex Seizures (to Phase 2, met endpoints)
- Drug Resistant Pediatric Seizures (early stage positive results)
- Post Traumatic Stress Disorder (mentioned here)
- Behaviors in Fragile X Syndrome (to Phase 2, failed primary endpoint but showed positive results in anxiety)
- PCDH19 Female Pediatric Epilepsy (to Phase 2a, generally positive results)
- Status Epilepticus (currently in Phase 2)
- Lennox-Gastaut Syndrome (no published results)
- CDKL5 Pediatric Refractory Epilepsy (positive Phase 2a results)
- Postpartum Depression (currently in Phase 2)
- Angelman Syndrome (preclinical model only)
Marinus currently has four studies of ganaxolone covering three potential indications. Here is an overview of each of these studies:
CDKL5 Pediatric Refractory Epilepsy
Marinus has declared CDKL5 Disorder as its "leading pediatric orphan epilepsy program" after positive results from a Phase 2a open label study. CDKL5 is a rare X-linked genetic disorder that causes severe, early onset seizures and severe delays in neurological development. Infants who suffer from this disease generally have seizures within the first few months of life and struggle to develop the ability to walk, talk, or feed themselves. They are generally wheelchair bound for their entire life. The severe seizures cause a condition known as epileptic encephalopathy, which likely further damages the brain's development. An early, effective treatment for seizures may not only reduce overall seizures but may also give improved hope for limiting the degree of the developmental delay of the disorder.
There is no known anticonvulsant that works frequently in CDKL5 Disorder at this time. Neurologists typically try several different anticonvulsants to attempt and find the best results. However, CDKL5 seizures are known to be difficult to treat. Therefore, non-pharmacologic treatments such as the ketogenic diet, vagal nerve stimulator (VNS) implantation, and even corpus callosotomy are sometimes used for treatment. Therefore, if ganaxolone works in Phase 3 studies, the likelihood of approval on this indication is high. The encouraging Phase 2 data combined with this fact is likely the reason that Marinus chose this indication to lead its rare disease program.
Marinus is also pursuing ganaxolone to treat postpartum depression. Sage Therapeutics has released positive data for its similar IV-only drug in postpartum depression as well as positive data in treatment resistant depression with its similar oral medication. Both of these were covered in my article about Sage. These two studies should bode very well for Marinus. Jérôme Verony has written an excellent article about the implications of the Sage success with brexanolone as it relates to this indication for ganaxolone.
Marinus currently is running two Phase 2 studies in Postpartum Depression (PPD). The first is the Magnolia study of an IV form of ganaxolone in severe PPD. The study lasts for 30 days after initial dosing and includes an option for continuation on an oral form of the medication. This is a key differentiation from Sage's drugs as it basically has one IV compound and a different oral compound, whereas Marinus is pursuing both IV and oral for the same compound. Marinus is also pursuing the Amaryllis study of an oral form of ganaxolone in moderate PPD. The Amaryllis study will ultimately be one of the key studies to differentiate ganaxolone from Sage-217 (Sage's oral compound).
Data from the Magnolia study is expected in 1Q 2018 with the data from the Amaryllis study following later in 2018. The Magnolia study represents the largest short-term catalyst for Marinus. The bar for these results will clearly be set by the Phase 3 results for Sage's brexanolone. Brexanolone's results were positive, but not as strongly positive as the P2 results for Sage-217 in treatment resistant depression. If Marinus can produce statistically significant results (which should be likely), it should be able to at least match the brexanolone results. Many investors are likely expecting at least a match at this point, so this would likely only be a small positive for the stock. However, if the results had p values of 0.01 or lower, I would expect a much more significant increase in the stock. Conversely, negative results would move the stock significantly lower.
The bar for the Amaryllis study will ultimately be the head-to-head comparison with the Sage-217 study in PPD. Sage will likely release its results in 2Q of 2018, which is likely to be before the Amaryllis study completes. Positive results for Sage-217 would likely lift Marinus stock, but then ganaxolone would likely need better results (than Sage-217) to raise the stock much further. Marinus ideally needs to speed its timetable for Phase 3 studies (for any indication) as there would likely be a significant first-to-market advantage between ganaxolone and Sage-217. One could envision a scenario where Marinus could expedite ganaxolone for CDKL5 in hopes of approval for that prior to Sage-217 getting approval for any indication. Assuming the PPD indication had significant positive data, it is likely that some providers would begin prescribing whichever of the two were available first (even if they could not yet be marketed for PPD and were still considered off-label).
Status Epilepticus is defined any seizure lasting more than five minutes (or multiple seizures in that time period without recovery). Typically, it is treated with IV medications (if in the hospital) or rectal medication (if in the home). Benzodiazepines (such as diazepam or lorazepam) are the most commonly used medications. Marinus is conducting a feasibility study of ganaxolone for adjunctive treatment (to the standard of care) of established status epilepticus in hospital settings. The study has a design that includes a loading dose and then 2-4 days of continuous infusion followed by taper. There is also a placebo arm. The goal of this study is to provide evidence that ganaxolone works at or above the efficacy of the current "second level" meds (which are the generics of Depakote, Dilantin, and Keppra). All three of these "second level" meds have significant side effects and also fail to work about 30-40% of the time. Ultimately, the loading dose of ganaxolone will need to work to avoid study drop-out (the continuous infusion will likely only occur if the loading dose stops the seizure activity).
Marinus currently lists this study on ClinicalTrials.gov with an estimated completion date of December 2019 (although it expects available data sometime in 2018). If it takes that long to complete the study, I believe that it would not be a good sign. Recruitment rate for this study is going to be the primary determinant of length. It is the type of study that will be somewhat difficult to recruit for initially (even with reassurances to the families of what will happen if the patient receives placebo). However, if physicians involved in the study believe that they are seeing fewer second-line treatment failures for patients in the study, they will have an easier time recruiting patients for the study. It is much easier to convince someone to choose to enroll in a study if a physician is able to say something like "I am not seeing as many patients needing to be intubated if they are enrolled in the study." This can occur even with the study remaining blinded.
With a 250 patient enrollment goal (and assuming several sites), the first 50-100 will be the key. For illustration purposes, let's say that around 100 patients were enrolled in the first six months. That should be enough for the study physicians to have an idea of success. If the enrollment is completed four months later, then that is a good sign. If six months after the first 100 there have only been 50 more patients enrolled, then that would indicate that the study physicians do not believe that it is making a difference. Of course, this would depend on Marinus updating investors on the number of participants enrolled. It is also possible that the study would be prematurely ended on a third-party data look-in if the results were clear enough to be noticed by the study physicians (in either direction).
This indication may be the most difficult of the three discussed to obtain positive results. However, positive results here would be excellent for the future of the drug and for the stock price. I do not believe that positive results for this indication are even partially factored into the stock price at this point.
Marinus vs. Sage
Very few of the companies that I have written about have as many points of direct comparison as Marinus and Sage. The market has clearly given the advantage to Sage as evidenced by the difference in market caps (currently around $7 billion for Sage vs. $276 million for Marinus). Ultimately, the question for Marinus is does it deserve to be at more than 4% of the value of Sage? To help answer this, I will give an overview of the head-to-head comparisons:
|IV Treatment of Postpartum Depression||Currently P2||Passed P3||Sage, Significant|
|PO Treatment of Postpartum Depression||Currently P2||Currently P2||Sage, Slight|
|Treatment Resistant Depression||Not Yet Tested||Strong P2 Results||Sage, Significant|
|Seizure-Related Studies||Currently P2, Failed a P3||Failed||Marinus, Significant|
|Number of Pipeline Meds Phase 1 or Greater||1||3||Sage, Moderate|
|Number of Indications Being Actively Studied||4-5||8||Sage, Moderate|
Brexanolone and ganaxolone are so closely related that I believe it is likely that either both will ultimately be approved or neither will. I lean towards likely eventual approval of both. I also lean towards eventual approval of Sage-217. Therefore, the majority of the comparison will be likely market share of the IV and PO forms of their respective compounds for each indication. For this, I will give rough estimates of what I believe each indication is worth and what market share I believe each compound could obtain. Please note that these are extremely rough relative estimates for comparison purposes and should not be used on their own to value the stocks. I am only using indications that are currently being studied (or had recently completed studies that show some value) for comparison.
|IV Treatment of Postpartum Depression||2 billion||10%, 200 mil||90%, 1.8 bil|
|PO Treatment of Postpartum Depression||6 billion||40%, 2.4 bil||60%, 3.6 bil|
|Treatment Resistant Depression||2 billion||0%, 0||100%, 2 bil|
|CDKL5 & PCDH19 Epilepsies||300 million||100%, 300 mil||0%, 0|
|Status Epilepticus||300 million||100%, 300 mil||0%, 0|
|Essential Tremor||300 million||0%, 0||100%, 300 mil|
|Parkinson's Disease||1 billion||0%, 0||100%, 1 bil|
|Other Compounds and Indications||n/a||50 mil||600 mil|
|TOTAL||3.25 bil||9.3 bil|
Therefore, I am valuing Sage's pipeline at roughly 3x the pipeline of Marinus. This is without factoring in the time advantage that Sage has on getting a drug approved. If Sage is able to get brexanolone approved on its first try, then this time advantage will likely be at least 2-3 years. Therefore, I believe a more appropriate intermediate-term multiple between the two should be more in the 6-8x range.
I have previously stated that I believe Sage is near present value if not slightly overvalued. I would suggest a fair value around 6.3 billion if not for the potential of acquisition that is buffering the price. The potential downside in my estimation is somewhere around the $4 bil valuation ($100/share). I believe the upside potential of Sage in the next year is around $9 bil. For Marinus, I believe the upside is getting to the area of 1/6th-1/8th of my estimated fair value of Sage. This would be a valuation of $787 million to $1.05 billion. That represents a potential 185-280% upside. However, Marinus has more downside risk as a failed postpartum depression study would significantly weaken the prospects of the drug by as much as 80%.
Ultimately, Marinus is fairly typical of small cap biotechs that have one main compound with several potential indications. The upside potential is high as success of that one drug will cause significant appreciation. However, the downside risk is also high due to the dependence on a one-drug portfolio. Any unexpected major side effect can decimate this type of company at any time. Marinus, unlike some of the similar speculative biotechs, has somewhat of a "canary in the coal mine" in the form of Sage's brexanolone. As that canary is currently looking good, I believe that Marinus is a reasonable choice for a small, speculative holding.
If you would like to read other articles in my antidepressant series, consider these:
- Does Sage's Antidepressant Franchise Make It An Acquisition Target?
- Is Allergan The Best Buy If You (Or Your Portfolio) Are Depressed?
- Esketamine Could Give Johnson & Johnson The Next Major Psych Blockbuster
- VistaGen: Risky Anti-Depression Play
Author's Note: Thank you for reading my article. Please follow me for additional articles covering the biotech space with emphasis on Neuroscience. As always, I will disclose below which drug companies I have mentioned in the article for which I am the recipient of direct marketing. My articles include my personal opinions and are neither financial nor medical advice. They are solely intended to show my perspective and due diligence on a given subject. Please consult with the proper professional if you are looking for specific advice for your situation.
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.
Additional disclosure: As a physician, I receive direct marketing from many companies which generally consists of marketing lunches provided to myself and my staff. I have not received any marketing lunches from the companies mentioned in this article. I expect that any newly approved antidepressants would be marketed to me in the future. I have never been paid by a pharmaceutical company for speaking, writing, or any other similar action.
Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.