MEI Pharma: A $2 Biotech Concern With 9 Lives

Summary

• Today, we take a look at a small oncology concern based in San Diego called MEI Pharma.
• The company has several 'shots on goal', strategic partnerships, and, recently, addressed its funding needs.
• Below, I provide a quick analysis on this small-cap company and if it may finally reward its long-suffering shareholders.
• I do much more than just articles at The Biotech Forum: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »

Women and cats will do as they please, and men and dogs should relax and get used to the idea." - Robert A. Heinlein

I have had a few questions come up from followers around a $2 biotech stock called MEI Pharma (NASDAQ:MEIP) in recent weeks. Given it has been a long time since I glance at this small oncology concern - which seems to have been around forever; today, we revisit this name and post our analysis in the paragraphs below:

Company Overview:

MEI Pharma is a small oncology concern based in San Diego. It is focused on developing various therapies for the treatment of cancer. The stock trades at $2.20 a share and has a market capitalization of just north of $200 million.

Pipeline:

The company's pipeline consists of four clinical-stage candidates, including one candidate 'pracinostat' in combination with Vidaza is in an ongoing Phase 3 global registration trial. The target for this combination therapy is treatment-resistant Acute Myeloid Leukemia or AML. MEI is fully partnered with Helsinn Group, a Swiss-based firm, for the development of pracinostat. Helsinn is paying all developmental costs for pracinostat. MEI Pharma is entitled to potential milestone payments of north of $400 million as well as royalties on commercial sales in the mid-teens. Some mid-stage data from another trial using pracinostat in combination with Vidaza to treat high-risk Myelodysplastic Syndrome or MDS which should be disclosed shortly.

Another drug candidate 'ME-401', which is an oral P13K Delta inhibitor, is entering a clinical study to support an accelerated approval marketing application with the FDA. ME-401 is a monotherapy targeting relapsed/refractory Follicular Lymphoma in this trial. MEI Pharma owns all commercial rights outside of Japan where it is partnered with Kyowa Kirin.

Analyst Commentary & Balance Sheet:

Four analyst firms including BTIG and Oppenheimer have chimed in on MEIP so far in 2019. All have Buy ratings on the stock. Price targets range from $5.50 to $10.00 a share. JonesTrading was the last analyst firm to provide commentary on MEI Pharma when it initiated the shares as a new Buy with a $6 price target earlier this month.

The company ended the third quarter with just north of $65 million of cash and marketable securities on the balance sheet. In mid-December, MEI Pharma raised some $45 million via a secondary offering at $1.60 a share. The company burned through just over $14 million in the third quarter to fund all R&D and operational costs. Four insiders bought just under $170,000 in aggregate of the secondary offering. I would call that a 'token' amount at best, but it was some of the few insider buys in the equity of MEIP over the past five years.

Verdict:

MEI Pharma has some attractive traits for a developmental or 'Tier 4' concern. It has just addressed its funding needs. The company's pipeline also has multiple 'shots on goal' and key partnerships. Analyst support is fairly strong in this name as well despite not being able to get any compound over the 'finish line' of FDA approval to this point as a public company.

However, one can't look at the stock chart above and have high confidence the company is finally going to deliver on its promise. This concern is firmly in 'Ten-Year Rule' territory. Those who want to know more about MEI Pharma, there was a good investor presentation put out last month which it presented at the Stifel Nicolaus Healthcare conference.

Given this, I have no investment recommendation on MEIP. The only way I would even entertain a play on this name is via buy-write orders as options are available against the equity. In addition, MEIP seems to have more lives than the proverbial cat, so that could turn out to be a 'rinse, wash, and repeat' strategy that could work over the longer term with this name.

Owners of dogs will have noticed that, if you provide them with food and water and shelter and affection, they will think you are god. Whereas owners of cats are compelled to realize that, if you provide them with food and water and shelter and affection, they draw the conclusion that they are gods." - Christopher Hitchens

Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum, and Insiders Forum.

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.