Medicinova: Developmental Pharma With Massive Long Term Potential
Scott Matusow | May 03, 2012 05:47AM ET
Primary ticker: MNOV, Secondary tickers include: AZN, GSK, MRK, PFE
I previously released an article referencing MediciNova (MNOV), which engages in the acquisition and development of small-molecule therapeutics for the treatment of serious diseases for the United States market. This is an up and coming company who has incredible potential as an investment because of its strong pipeline of six clinical stage compounds and tiny market capitalization.
As of the end of the trading day on May 1st, this value was around $48 million. I have seen companies that look far less appealing selling in a price range that reflects a 150-200 million dollar market cap. Even if MNOV could achieve the bottom end of this range, that would put it around $9/share compared to the $2.83 price it currently sits at.
Let's take a look:
Although this pipeline taken directly from MNOV's website contains numerous clinical pipelined drugs, I want to focus on the most advanced clinical drug to date.
The drug candidate that I feel is not giving MNOV appropriate visibility is their MN-221 drug for Acute Exacerbations of Asthma, more commonly referred to as an asthma attack. Why is this drug important? For starters, asthma affects one in twelve people or about 25 million in the United States alone.
Secondly, approximately two million emergency room visits per year are due to asthma attacks. Of those, about 500,000 lead to hospital stays. MediciNova is looking to prevent these people from needing that expensive hospital stay by filling an unmet need for those not responding to the typical treatments. The reason is pretty simple for people's tendency to go to a hospital for asthma: breathing is the most critical necessity of life!
MediciNova has completed 2 phase II clinical studies for MN-221, with important data from one of the studies due out before the end of this month, the other at the beginning of June. Positive results from these studies could lead to a possible pivotal trial if the trials confirm the success of the prior phase 1 studies, which should lead to a partnership with a large pharma.
Patients suffering from acute exacerbations of asthma in the emergency room who were not promptly responding to standard pharmacotherapy were enrolled in the study. MediciNova is currently in the process of auditing and organizing the data and preparing to lock the database for a complete analysis.
In prior double blind studies, MN 221 was given to patients from an IV. Once in the bloodstream, scientists believe MN-221 may directly enter the lungs and migrate to the irritated bronchial tubes, eventually relaxing the muscles which may result in an open airway. Most of the time when people go to the ER for an asthma attack, they are given the same types of things they take at home just in higher doses combined with medical therapy. It's clear to me that these advancements have not gone far enough to help people with a symptom as scary as not being able to breathe. MediciNova is looking to fill an unmet need whose end result is 500,000 people not responding well to common treatments.
In modeling the market potential of MN-221, Chief Business Officer Michael Coffee about bio-pharma catalyst trades , I expect a run-up to start within the next 2 weeks before the data on MN-221 is revealed. At $3.02 a share, no debt on the books, and a market cap under 50 million, MNOV is highly undervalued, and should be selling for near $4 a share. I would not be surprised to see a $4 a share price after the data on MN-221 is released.
My price target opinion: $3.50 a share short term, $4.25 midterm, and an $8 one year target price.
Disclosure: I am long MNOV.
Disclaimer: This article is intended for informational and entertainment use only and should not be construed as professional investment advice, but rather my opinions as a writer only. Always do you own complete due diligence before buying and selling any stock.
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