History is littered with the wars everybody knew could never happen.”― Enoch Powell
Today, we revisit a small call name that comes up quite frequently in comments from readers and that we haven’t looked at in just over a year and the company’s story continues to evolve. A full analysis follows below.
Marinus Pharmaceuticals, Inc. (NASDAQ:MRNS) is a Radnor, Pennsylvania-based pharmaceutical concern focused on the development of therapies for the treatment of rare genetic epilepsies and other seizures. The company has one compound (ganaxolone), which was recently approved for seizures associated with cyclin-dependent-kinase like 5 (CDKL5) deficiency disorder (CDD) and is undergoing clinical investigation for four other indications. Marinus commenced operations in 2003 and went public in 2014, raising net proceeds of $41.2 million at $32 per share, after giving effect to a 1-for-4 reverse stock split in September 2020. Shares of MRNS currently trade just over six bucks a share , translating to a market cap of approximately $250 million.
The company’s raison d’etre is ganaxolone, an oral synthetic analog of endogenous neuro-steroid allopregnanolone, whose mechanism of action isn’t fully understood, except for the fact that it is known to interact at both synaptic and extra-synaptic gamma-aminobutyric acid type A (GABAA) receptors, which have a functional role in anti-seizure, antidepressant, and anxiolytic activities.
After demonstrating a median 30.7% reduction in 28-day major motor seizure frequency versus 6.9% for placebo (p=0.0036) in a 101-patient Phase 3 trial, ganaxolone became the first FDA-approved therapy for the treatment of seizures associated with CDD in patients two years and older on March 18, 2022. Its commercial moniker is ZTALMY, and it is scheduled to launch in July 2022.
CDD is a rare genetic disorder caused by a mutation of the CDKL5 gene, characterized by early onset seizures, difficulty walking and talking, and in some instances scoliosis, GI issues, and sleep disorders. CDKL5 encodes proteins associated with brain function and its mutation occurs in ~1 in 40,000 live births in the US – predominantly female as it is located on the X chromosome. Marinus estimates the US addressable market for this potentially fatal disease at ~2,000 patients. With ZTALMY expected to generate average annual revenue per patient of ~$133,000, the total domestic opportunity is projected at ~$266 million. An approval decision in the EU is expected near YE22.
If ZTALMY is approved in Europe, Marinus is set to receive milestones and royalty payments from a deal it inked with Orion Corporation in July 2021. In return for the European commercial rights to ganaxolone, Marinus received $29.6 million upfront and is eligible to receive clinical and commercial milestone payments totaling ~$115 million, as well as low double digit to low 20 percent royalties.
Owing to the fact that CDD was designated a rare pediatric disease by the FDA, Marinus received a priority review voucher, which it intends to monetize to fund further clinical development, as well as the commercialization of ZTALMY.
The oral suspension formulation of ganaxolone is also undergoing evaluation for the treatment of tuberous sclerosis complex [TSC] in a Phase 3 trial (TrustTSC). TSC is a rare genetic disorder characterized by non-malignant tumors in the brain and other organs, causing epilepsy in ~85% of those afflicted, as well as skin conditions and behavioral problems. It is triggered by a mutation in either the TSC1 or TSC2 gene and occurs with a frequency of 1 in 6,000 live births. There are two FDA-approved remedies for TSC: Novartis’ (NVS) Disperz (everolimus); and Jazz Pharmaceuticals’ (JAZZ) Epidolex (cannabidiol). However, these anti-seizure medications are only effective for a subset of that population, ~25,000 to 40,000 leaving Americans in need of alternatives.
In a Phase 2 study, ganaxolone as an adjunctive therapy to either everolimus (n=11) or cannabidiol (n=12) induced a 16.6% median reduction in TSC-related seizures at day 28 versus baseline. Based on those results, Marinus has initiated a 162-patient, placebo-controlled TrustTSC trial with a primary endpoint of percentage change in TSC-associated seizure frequency at day 28. Besides the introduction of the placebo, the Phase 3 study will have a shallower titration, owing to a prevalence of somnolence in patients during the Phase 2 trial. Data are anticipated in 1H24. Ganaxolone has received orphan drug designations for this indication from both the FDA and EMA.
Other Ganaxolone Formulations And Indications
In addition to its first-generation oral version, the company is developing IV and second-generation oral formulations of ganaxolone to increase its bioavailability and pharmacokinetic profile.
The current target of the IV formulation is status epilepticus [SE], defined as a single seizure lasting more than five minutes or two or more seizures within a five-minute period without the patient returning to normal consciousness between them. SE is the second most common neurological emergency in the US – only behind strokes – with ~150,000 cases per annum. It is life-threatening and can cause neuronal damage with it becoming permanent refractory to treatment over time.
In a first-line setting, SE is treated with benzodiazepine, which is effective slightly more than half the time. Those patients that don’t respond are dubbed ESE (established SE) and are treated with second-line anti-epileptic drugs (AEDs) such as levetiracetam, fosphenytoin, or valproate, which (on average) have a success rate of ~45% . Patients who do not respond to second-line therapy are termed RSE (refractory SE) and are placed into a medically induced coma.
After Marinus’ CNS-selective IV GABAA Modulator demonstrated rapid onset and efficacy in RSE patients in a Phase 2 trial, it commenced evaluation in a Phase 3 study (RAISE). The 124 RSE patients who have failed on two or more AEDs are to be treated with either a 36-hour IV ganaxolone followed by a 12-hour taper or placebo. Co-primary endpoints include proportion of patients with SE cessation within 30 minutes of treatment initiation without the need of other interventions; and proportion of participants with no progression to medically induced coma for 36 hours post-treatment initiation.
Initially, data from this potentially pivotal trial were expected in 2H22. However, the trial’s completion has been delayed after it became necessary to reduce the shelf life of IV ganaxolone to meet product testing specifications after a routine monitoring of stability batches. With this interruption of clinical supply material, Marinus now expects data in 2H23. Furthermore, a second, somewhat similar, 70-patient Phase 3 trial (RAISE II) in Europe and a Phase 2 study (RESET) as a second-line therapy in ESE patients are having their initiations delayed approximately six months due to this same supply issue. They are now set to commence in 1H23 and 2H22, respectively.
For the second-generation oral formulation of ganaxolone, Marinus has identified Lennox Gastaut Syndrome as its initial target, with Phase 1 data anticipated in mid-2022.
Balance Sheet & Analyst Commentary:
To conduct these trials and ready itself for commercialization of ZTALMY, Marinus held cash and equivalents of $122.9 million and $45 million of debt as of December 31, 2021. However, its priority review voucher should command ~$105 million on the open market and the approval approval of ZTALMY unlocked an additional $30 million of debt financing. Furthermore, the company is receiving funding from the Biomedical Advanced Research and Development Authority (BARDA) for its RAISE trial and related activities that could total $51 million. To date, Marinus has received $8.1 million from BARDA. With these additional sources of liquidity, the company should have a cash runway early 2024, meaning a successful launch of ZTALMY may obviate the need for additional financing, or at least equity financing.
The Street is unanimously bullish on Marinus’ prospects, with the nine analyst firms including Cowen & Co. and Jefferies, who have offered a commentary in the past three months splitting its recommendations between buys and outperforms. Price targets proffered range from $17 to $50 a share.
Marinus has made a solid comeback after ganaxolone failed a Phase 3 trial in 2016 for adult focal onset seizures and a Phase 2 study for postpartum depression in 2019. As for its future, based on the results of its Phase 2 TSC trial, the odds of TrustTSC achieving its primary endpoint are slim. The company provided the “median” reduction in TSC-associated seizures of 23 patients in the Phase 2 test. Two more non-responsive patients would have more than half that median. In fact, the chart of the patient outcomes looks more like a random distribution curve than a signal of efficacy with a mean reduction close to zero. The placebo control in the TrustTSC will likely shed light on this Phase 2 trial statistical quirk.
That said, the SE indications are solid for ganaxolone, trial delays notwithstanding. Although the Phase 2 RSE study only encompassed 17 patients, it demonstrated a clear promise, setting the stage for successful Phase 3 studies and subsequent approval. Furthermore, there is little clinical competition for the company’s targeted indications, making the path to approval potentially easier.
However, the recent trial delays due to an interruption of clinical supply materials set the Marinus SE story back at least six months. The initial sales data from its ZTALMY launch won’t be forthcoming until (likely) November 2022 and with only Phase 1 study data due in mid-2022, there isn’t much to hang one’s hat on over the balance of the year. With robust (albeit thinly traded) option premiums, Marinus is currently best played from a covered call angle.
Diplomacy is the art of letting someone else have your way.”― Sir David Frost
Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum, and Insiders Forum