Marinus Postpones Depression Drug Data, Presents Itself As A Great Buying Opportunity

Summary

• Delayed post-partum depression from the phase 2 Magnolia study presents a huge opportunity to buy shares of Marinus.
• Marinus is testing both an IV ganaxolone and an oral version of ganaxolone for post-partum depression reducing risk.
• A competing product brexanolone from Sage Therapeutics, with the same mechanism of action as ganaxolone, has shown positive results in patients with post-partum depression.
• Two other rare disease indications in the pipeline will act as backups just in case the depression studies don't succeed.
• Marinus has enough cash to fund operations well into 2020.

On Tuesday, Marinus Pharmaceuticals (NASDAQ:MRNS) revealed that it would push up the date for data until Q3 2018 for its phase 2 ganaxolone study treating women with post-partum depression (PPD). This study is known as the Magnolia study. This news sent shares of Marinus down by 10% pre-market, but I believe that the delay provides a buying opportunity. That's because the company is expected to initiate a phase 3 study for a pediatric indication by mid-2018. In addition, there are other readouts due out by the end of the year. That's why I believe that despite the delay in data Marinus is still a buy as a speculative investment.

Phase 2 Magnolia Study

The trial that is being delayed with respect to data is the phase 2 Magnolia study. This study was to recruit up to 60 patients with PPD. This study is a multiple-dose escalation study that will be conducted primarily in the United States. One thing to note about this study, is that it is treating patients with an IV version of ganaxolone. Why did I mention that? The reason being is because Marinus is also developing an oral version of ganaxolone to treat patients with PPD as well. The oral version of ganaxolone in patients with PPD is being explored in a study known as the Amaryllis Study. That means data from the IV ganaxolone study is important, but the company also has a backup with the oral version. This is something that investors should keep in mind despite the results being delayed for the Magnolia study. While the delay is disappointing, I feel that the company's reasoning is highly logical. This is the company's reasoning for the most recent press release from its earnings report:

Based upon the effect size shown in a recent study for a compound with similar mechanism of action, the Company has increased targeted enrollment in this study. This increase in study scope and the corresponding forecast for patient recruitment have extended our expected timing for completion of the first part to the third quarter of 2018.

First of all, it makes perfect sense that a study would be delayed if additional recruitment is added into the study. Secondly, there must be insight as to why Marinus was forced to move up the study. Well, it is in the language of the quote above. Specifically in the section where it mentions that a compound with a similar mechanism of action showed improved effect in patients with PPD. In other words, a competitor had seen positive effect with respect to a drug with a similar mechanism of action as ganaxolone. Therefore, the company took it upon itself to increase enrollment. This company with a similar mechanism of action drug to ganaxolone is known as Sage Therapeutics (SAGE). If anything there is reason to be bullish on Marinus, because of Sage Therapeutics. That's because Sage's drug brexanolone achieved positive results in post-partum depression, which is what Marinus is working on. Sage also achieved positive results in two lage-stage studies in major depressive disorder (MDD) as well. As I mentioned before, ganaxolone is similar in mechanism of action to brexanolone. That's why I have high hopes that the data for the Magnolia study will also be positive.

Phase 3 Study For Pediatric Disease

The delay for the study is disappointing, but I think that it is not wise to dismiss the rest of Marinus' pipeline. That's because it is expecting to initiate a phase 3 trial treating children with CDKL5 Deficiency Disorder. This is a disorder characterized by severe seizures, in which there are no approved treatment options. I must note, that this phase 3 study is going to use an oral version of ganaxolone. Ganaxolone may offer hope for these patients who experience these seizures daily. Even worse, they are resistant to current seizure medications. Therefore, this clinical program offers a great opportunity for share price appreciation. That's not to say that the PPD program is not important, it is. The thing is that there is something else such as this rare disease drug program that can also act as a catalyst for the stock. Data from this study is expected by Q4 of 2018.

One Additional Rare Disease Indication

If one rare disease wasn't enough, well Marinus is working on another. This involves a rare disease known as status epilepticus. This rare disease is one that is far dangerous. That's because it involves seizures that occur one after another with no recovery period. There are two types of status epilepticus seizures. One is a convulsive type, and the other is a non-convulsive type. Convulsive status epilepticus requires immediate medical attention in a hospital. As you can see this disease is life threatening. Therefore, this is another opportunity for Marinus to go after an indication that has an unmet medical need. One form of treatment used for this disease are Benzodiazepines. The problem is that they can become habit forming and addictive. With that in mind, Marinus has initiated a phase 2 study using the IV ganaxolone in these patients with status epilepticus. Data from this study is expected by Q4 2018.

Financials

According to the most recent earnings report, Marinus has cash and cash equivalents of $58.4 million as of December 31, 2017. According to the company it has enough cash to fund operations well into 2020. That means there is no near-term risk of dilution. In addition, that is plenty of cash to get its three clinical trial results readout before the end of 2018. If all or some of the trials are positive, then I expect it will be easy for Marinus to find a partner if it is willing to do so.

Conclusion

Marinus Pharmaceuticals presents itself as a buying opportunity after the announcement that data from the phase 2 Magnolia study has been delayed. It is my opinion that the company remains a great speculative buy. There is still the risk that all the trials above could end up failing, and investors should account for that. Even if the phase 3 CDKL5 Deficiency Disorder study is successful, there is no guarantee that it will meet the FDA's standard for marketing approval. In any case, Marinus still has a lot going for itself and why I believe it remains a strong buy. It is possible that it could dip in the short-term on the delayed trial announcement, however, with three data readouts before the end of this year I think that the value of the company will be changed dramatically one way or another.

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

Analyst’s 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.

Comments

[EagleFirst]

Terry,

Are you going to write an update on MRNS anytime soon now that the PPD data readout is getting closer by the day? Thanks!

Kevin

[Terry Chrisomalis]

Well more than likely after the data is out.

[Ski Now]

Very nice recovery this past week+.

[DisruptiveDave]

I was actually impressed how well MRNS held up in yesterday's bloodbath, but one day doesn't necessarily mean very much. It's a marathon and MRNS looks like it will likely have solid endurance.

[mds91]

MRNS already had it's drop. 8-3. But I agree, it's showing strength now. Just needs few more weeks.

[Hockeyguy4unow]

Search “Ganaxolone IPFS”, and then look at its MOA (mechanism of action). That’ll explain my posts...

[GDPPP]

That certainly explains why SAGE is a mid-cap while MRNS has yet to cross the $1B market cap threshold.

[DisruptiveDave]

SAGE dropped 9.5% today while MRNS dropped 0.5%, SPY down 2.1%

[Terry Chrisomalis]

Just an overall bad market. need to see a turnaround in the market

[Hockeyguy4unow]

Regarding my last long post, I am not “trolling”, as Jerome suggests. Ganaxolone was designed in a lab from a single methyl substitution of allopregnanolone. (For heaven’s sake, look it up in Wikipedia). This methylation rendered it unable to attach to the estrogen and progesterone receptors (unlike the former) to reduce the “neuro-steroid” effects—and thus potential side effects. In essence, making it a safer, purer anti-seizure play...
However, my contention is that the neurosteroid effects (on the progesterone receptor specifically) is what it responsible for the efficacy in PPD (since Progesterone levels plummet right after pregnancy!). Thus, my belief is that SAGE’s drugs will be more effective in PPD than our drug, which has NO effect on the Progesterone receptors.

[Jérôme Verony]

I didn't imply you were trolling; the comment I pasted here referred to another post on the yahoo message boards where this discussion appears to have originated.
In any case, you may recall that the amazing 11 point effect observed in Sage's PhII PPD trial was not replicated in their PhIII (only 4-6 points effect size), which makes me sceptical about this progesterone hypothesis.

Overall, I am far from convinced that some of the notions put forth about allo or ganaxolone's MOA and insights from animal models easily translate into real-world, in-human outcomes. For instance, animal models would have us believe that allo is a better anti-epileptic than ganaxolone, however, Sage's SRSE PhIII was an utter failure whereas Marinus' oral ganaxolone formulations are showing impressive and durable seizure reduction in children with genetic epilepsy.

Time will tell. I'm willing to bet we'll see a major run-up into the readout of MRNS' PhII in Q3, which is now powered for stat sig alongside dose exploration. People may play the swings but if push comes to shove, nobody wants to miss up on a cheap 'option' on the neurosteroid / depression cake.

[Hockeyguy4unow]

Excellent response. My feeling regarding epilepsy is that older people have tangled webs in their brains that

[Hockeyguy4unow]

I agree... my post got cut off.. regarding seizures, I think that younger, virgin brain wiring is different than the tangled neurons of older adult brains, so I suspect that all these neurosteroids are more effective against seizures in children than adults. So I would be surprised if Ganaxolone would fare better in status epileptic is than Sage’s drug did...

[montigua]

I'm really hitting my pain threshold on this one. I bought on a dip and it slipped even further. Management definitely hasn't eased my concerns. May buy more on a run up to break even and then watch this one from the sidelines. Good thing my other stocks are doing fairly well otherwise I would have pulled the plug on my shares.

[mds91]

My 2 cents is to average down in an uptrend, not in a downtrend. it'll find a bottom, then sideways. that's when you can make better use of the money imo. As of late, it's been making lower highs and lower lows with the exception of Monday.

[DisruptiveDave]

Wow, the price keeps going lower.

[Giovanni Trombetta]

a quick look at technicals....two days ago big bounce on the 200 moving averages....yesterday big tussle on the same average and then close below....today...it is the logical continuation...look at the charts....the next buying possible target is 3.27....

[mds91]

I'm thinking 3.70 area may give support, otherwise I'm with you low 3s is next

[mds91]

I'm shocked and surprised to be honest. Only negative I see is that results got pushed back after a redesign in trials. Redesign should help offer more clear results. Don't view it as bad, but seeing the price action, doesn't feel too promising. Just unsure as to why management waited an entire quarter to let us know they are redesigning the trial. Probably why some insider selling recently.

Upset at myself for not taking action when I saw things breaking down last few weeks. Looks like we need to wait for dust to settle, but agree with GDPPP, something from within management to help ease the pain would sure help.

[Hockeyguy4unow]

I think everyone needs to study some basic science. Ganaxolone is different from brexanolone in one crucial way. It has one critical chemical modification which prevents it from binding to the progesterone receptors in the brain. This modification makes it more safe, as progesterone-receptor binding could induce steroid-like side effects (indeed, Prednisone’s effects are due specifically to its binding on this receptor). So, based on this, Ganaxolone is likely the safer drug for long-term use...that’s why it’s preferred in the pediatric population. HOWEVER, while it’s efficacy in seizure disorders is unaffected by this chemical modification, it is possible—even likely— that this drug WILL not work for MDD or PPD. The positive effects of brexanolone—especially in PPD— are due to its binding to the progesterone receptors. Ganaxolone has no effect on this receptor ...
Indeed, the writing is on the wall, that Ganaxolone will be less effective. Will it be effective at all? The plus side: if it IS effective, it’ll clean brexanolone’s clock because it is the SAFER drug with less potential steroid-like side effects. The negative side: it is likely to not work at all for MDD or PPD. Indeed, look at it’s past failure in the PTSD trial....another behavioral trial...

[Jérôme Verony]

Hi, there was a little back-and-forth on this exact topic in the comments section of one of my previous articles. Here's a comprehensive response to these assertions, which appear to stem from the yahoo message board...

https://seekingalpha.c...

[Jérôme Verony]

On a less esoteric note, you don't go and expand a PPD trial 9 months after launch because you're seeing no efficacy.

[Hockeyguy4unow]

Yes, I think there must be something positive...

[DisruptiveDave]

MRNS shares causing whiplash this week.
Beware of the traders, they love this type of volatility.

[Terry Chrisomalis]

Short-term it will be a hard trade. But looking at the bigger picture the company has another asset thats further along in the pipeline.

[User 49210009]

Another good analysis and write-up. I just initiated position yesterday and if it falls below my purchase price I will be buying more.

[Bright spot]

Isn't the brexanolone product superior to the ganaxolone?
I do agree that the child seizure meds may be what actually carries this stock forward, but SAGE with have market first advantage.

[Terry Chrisomalis]

if you are asking if brexanolone will get to market first then yes. As to who will dominate it is a little too early to say.

[greenmed]

If the drug gets to market more than six months after its competitor then I’d say the first one to market has the advantage. Unless of course some serious unanticipated adverse effect shows up .

[Jérôme Verony]

PPD is a multi-bn$ market and there is plenty of room for both products. Any positive outcome will be dramatic for MRNS as it trades around $200m vs $7bn for SAGE.

[B_Banzai]

Thanks for the update Terry.

[Terry Chrisomalis]

no problem.