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MNOV: Plenty of Cash to Advance Pipeline Forward

07/25/2018
By David Bautz, PhD

NASDAQ:MNOV

READ THE FULL MNOV RESEARCH REPORT

Financial Update

On July 23, 2018, MediciNova, Inc. (NASDAQ:MNOV) filed form 10-Q with financial results for the second quarter of 2018. As expected, the company did not report any revenues. Net loss for the second quarter of 2018 was $3.1 million, or $0.08 per share, and was comprised of $1.4 million in R&D expenses and $2.0 million in G&A expenses. This compares with $0.9 million in R&D expenses and $1.9 million in G&A expenses for the second quarter of 2018. The increase in R&D expenses was primarily due to increased clinical trial costs for MN-166.

Total operating burn for the second quarter of 2018 was $1.7 million and the company exited the second quarter of 2018 with approximately $64.1 million in cash and cash equivalents. During the first half of 2018 the remaining 750,000 warrants were exercised that resulted in gross proceeds of $2.4 million. There are no more warrants outstanding. We believe the company has sufficient capital to fund operations at least through the end of 2019.

As of July 20, 2018, the company had approximately 41.9 million shares of common stock outstanding. When factoring in the approximately 6.6 million stock options the company has a fully diluted share count of approximately 48.5 million.

Business Update

Encouraging Subgroup Data from Phase 2 ALS Trial

On July 9, 2018, MediciNova, Inc. (MNOV) announced encouraging data from a subgroup analysis of the recently completed Phase 2 study of MN-166 (ibudilast) in patients with amyotrophic lateral sclerosis (ALS). For the analysis, the company examined data from patients with either bulbar onset or upper limb onset ALS that did not require non-invasive ventilation (NIV), which were defined as the “Early ALS subgroup”. This group was comprised of 31 subjects out of a total of 49 subjects in the full analysis set. A second subgroup comprised of 39 subjects (out of a total of 67 subjects in the full analysis set) who had either bulbar onset or upper limb onset ALS with or without NIV (the “Early ALS + NIV subgroup”). Analyses were conducted for:

1) The ALS Functional Rating Scale Revised (ALSFRS-R) (Cedarbaum et al., 1999). The ALSFRS-R consists of a series of 12 questions on basic tasks (speech, salivation, swallowing, handwriting, cutting food, dressing and hygiene, turning in bed, walking, climbing stairs, dyspnea, orthopnea, and respiratory insufficiency) that are rated on a five-point scale where 0 = can’t do and 4 = normal ability. The individual items are summed to produce a score of between 0 = death and 48 = best. The score is utilized to keep track of the health of all ALS patients, and is a common outcome measure in ALS clinical trials.

2) The 5-item amyotrophic lateral sclerosis assessment questionnaire (ALSAQ-5) (Jenkinson et al., 2001). This is a shorter version of the ALSAQ-40, which is a 40-item questionnaire designed to evaluate five areas of subjective health status in ALS patients: physical mobility, activities of daily living and independence, eating and drinking, communication, and emotional reactions.

3) Manual muscle testing (MMT), which is used to evaluate any impairment in muscle function.

For this analysis, a responder was defined as a subject whose score either improved or did not change (i.e., the score did not worsen) following completion of the six-month double-blind treatment phase of the study.

ALSFRS-R

We believe the most important analysis performed was examining the ALSFRS-R score, as this is a validated measure of a patient’s health and is typically used as an outcome in registration trials. In the Early ALS subgroup there was a higher percentage of responders in the MN-166 group (6/20 – 30%) than in the placebo group (1/11 – 9.1%). In addition, 25% (5/20) of subjects in the MN-166 group improved (their ALSFRS-R score increased) compared to 0% of placebo-treated subjects. This is very encouraging as improvement in ALS patients, particularly over a six-month timeframe is not very common. Similar results were seen in the Early ALS + NIV subgroup, in which 26.9% (7/26) of subjects in the MN-166 group were responders compared to 7.7% (1/13) in the placebo group. Just as with the Early ALS subgroup, 23.1% (6/26) patients improved in the MN-166 group compared to 0% (0/13) in the placebo group. It should be noted that none of the differences in percentage of responders between MN-166 and placebo groups was statistically significant (although the differences in percentage of improvers came close to significance with P=0.09 and P=0.07 for the two subgroups, respectively), however the trial was not powered to show statistical significance.

ALSAQ-5

In the Early ALS subgroup, there was a much higher percentage of responders in the MN-166 group (12/20 – 60%) than in the placebo group (1/11 – 9.1%), which was statistically significant (P=0.0071). In the Early ALS + NIV subgroup, 50% (13/26) of subjects treated with MN-166 were responders compared to 23.1% (3/13) in the placebo group (P=0.1017).

MMT

In the Early ALS subgroup, 35.0% (7/20) of subjects in the MN-166 group were responders compared to 18.2% (2/11) in the placebo group. Similarly, in the Early ALS + NIV subgroup, 34.6% (9/26) of subjects in the MN-166 group were responders compared to 23.1% (3/13) in the placebo group.

Putting the ALS Data into Context

We believe the subgroup analysis for ALSFRS-R is very encouraging, particularly the data showing that 25% of subjects improved on MN-166! However, we also understand that ALS is a highly variable disease that can manifest itself quite differently from one patient to another, thus we were interested in how patients in other ALS trials fared and if sporadic responders (no change or improvement in ALSFRS-R score) are ever seen. To do this, we analyzed data from the Pro-Act Database, which has compiled over 8,500 ALS patient records from 18 Phase 2 and Phase 3 clinical trials that includes both placebo and treatment-arm data.

To perform this analysis, we first downloaded all available patient data, which yielded 1,681 records from placebo-treated patients with ALSFRS-R data and corresponding dates for that data. We then limited our analysis to patients who had data points at time 0 and a data point at approximately “6 months” (165-195 days). This reduced the number of patients to 1,493. Of those 1,493 patients, we found 37 (2.5%) that showed improvement at 6 months (the majority with a 1- or 2-point increase) and 74 (5.0%) that had the same ALSFRS-R score at 6 months for a combined responder rate of 7.4% (111/1,493).

While not a perfect comparison (for instance we did not control for riluzole use, although 82% of patients from the Pro-Act database were reported to have used riluzole vs. 100% of subjects in the MN-166 ALS trial), we believe this analysis gives a fairly good indication of what should be expected in terms of placebo responders at six months in an ALS trial based on ALSFRS-R score. The ALSFRS-R responder rate of 7.4% in placebo-treated patients from the Pro-Act database is very close to the 9.1% responder rate in the placebo group for the Phase 2 study of MN-166 in ALS and provides additional support that the 30% responder rate in the MN-166 group is a real signal.

MN-001 Reduces Serum Triglycerides in NASH Patients

During the second quarter of 2018, MediciNova announced the presentation of positive results from the company’s Phase 2 clinical trial of MN-001 (tipelukast) in patients with non-alcoholic steatohepatitis (NASH) and non-alcoholic fatty liver disease (NAFLD) at the 53rd annual meeting of the European Association for the Study of the Liver (EASL).

A total of 15 patients completed eight weeks of treatment with MN-001 (four weeks at 250 mg/day and four weeks at 500 mg/day), and MN-001 reduced serum triglyceride levels in 14/15 subjects. The average pre-treatment serum triglyceride level was 328.6 mg/dL, which was reduced to an average 192.9 mg/dL following eight weeks of treatment (-41.3%, P=0.02). The company also analyzed the data excluding an outlier subject that had an extremely high serum triglyceride level of 1288 mg/dL prior to treatment that was reduced to 300 mg/dL after treatment. That analysis showed 13/14 subjects with a reduction in serum triglycerides, from an average 260.1 mg/dL prior to treatment to an average 185.2 mg/dL following treatment (-28.8%, P=0.00006). Importantly, there were no clinically significant safety or tolerability issues during the study.

MediciNova has ceased enrolling additional patients and is stopping the study early due to achieving the primary endpoint, a reduction in average serum triglyceride level. Data will continue to be collected on patients that are already enrolled in the study, including a number of secondary endpoints at the 12-week timepoint. Based on the positive data in reducing triglycerides, we believe MediciNova may pursue a partnership for development of MN-001 to lower triglycerides in all patients, not limited to NASH and NAFLD.

Conclusion

The subgroup analysis for MN-166 is encouraging, although we note that the number of patients analyzed is small. However, we believe the data is supported by our analysis of the Pro-Act database, which shows a similar responder rate for placebo-treated patients when examining data from multiple Phase 2 and 3 ALS clinical trials. MediciNova’s subgroup analysis was limited to patients with either bulbar or upper limb onset disease, however we believe this still includes approximately 60% of all ALS patients. Thus, even if the label for MN-166 was eventually limited to only those patients, the company would still be able to capture an appreciable size of the ALS market and there could be potential for additional off-label prescriptions. The company is in strong financial shape and our probability adjusted discounted cash flow model results in a current valuation of $19 per share.

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