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Big catalyst coming up for Medicenna Therapeutics, says Research Capital

Canadian biotech company Medicenna Therapeutics (Medicenna Therapeutics Stock Quote, Chart, News TSX:MDNA) has lost a lot of ground in 2021 but analyst Andre Uddin of Research Capital Corp is maintaining an optimistic stance on the company. In an update to clients on Friday, Uddin left his “Speculative Buy” rating and target price of $6.90 target price unchanged, representing at press time a projected 12-month return of 170 per cent.

Headquartered in Toronto, Medicenna is a clinical-stage immunotherapy company specializing in developing novel interleukin (IL)-based treatments. Its lead product is MDNA55, an IL-4 that has completed Phase 2b clinical trial for the treatment of recurrent glioblastoma (rGBM), as well as being in preclinical and clinical development stages for the treatment of other brain and non-brain tumours.

Uddin’s latest analysis comes after the company released financials relating to the second quarter of its 2022 fiscal year, though Uddin said that financials at this point are less important as Medicenna is still in its clinical stage.

The company reported no revenue in the quarter, in line with Research Capital estimates and remaining consistent with the same quarter of the previous year. However, a net loss of $8.2 million came in below the Research Capital estimate of a $5.7 million loss and below the $3.8 million loss the company reported in the same quarter last year, with Uddin noting higher-than-expected R&D expenses to be the culprit.

Though Medicenna has yet to generate revenue, Uddin believes its efforts to secure an out-licensing deal for MDNA55 prior to the initiation of a Phase 3 clinical trial will serve as a key catalyst for the company moving forward, as he made the assumption of a potential deal in the opening quarter of the 2022 calendar year with $60 million in cash upfront.

“The design of the trial is unique, as it would also include an external control arm (a.k.a. synthetic control arm or SCA) comprised of subjects identified by registries at neurosurgery tissue banks, based on the same inclusion/exclusion criteria of the Phase 3 trial,” Uddin said. “This hybrid design would significantly reduce enrollment requirements in the control arm, thus lowering trial costs and shortening trial time.”

Even without the $60 million available, Uddin noted that Medicenna has $26.7 million in cash available with no debt, which he projected would give the company a financial runway through the end of the 2022 calendar year.

“We are confident the company can sign a licensing deal for a few reasons: (i) MDNA55 has Orphan Drug designation, (ii) the company has a solid data package based on its Phase 2b study, and (iii) the Phase 3 is a unique and cost-effective trial design,” Uddin said.

In addition to the ongoing efforts related to MDNA55, the company has also initiated a Phase 1/2 ABILITY study in Australia for MDNA11, an engineered IL-2 super agonist in development for cancer immunotherapy, with its main indications being for melanoma, renal cell carcinoma, and other solid tumors. The first patient was dosed on September 14, and on October 27, the company received approval on its IND application to expand the trial to U.S. clinical sites through the U.S. Food and Drug Administration.

Preliminary data of safety, PK/PD and biomarkers are expected by the end of this calendar year, with initial efficacy data anticipated in the middle of 2022.

“Our accomplishments over the past few months have laid the foundation towards achieving key milestones that intend to provide the first set of human data of MDNA11 with the aim to show differentiated and potentially superior clinical activity of our lead IL-2 Superkine asset,” said Fahar Merchant, PhD, President and CEO of Medicenna in the company’s November 12 press release. “We are particularly enthusiastic about advancing our preclinical assets derived from our BiSKITs and Superkine platforms, and expect to declare a lead candidate by calendar year end. In concert with the progress of our Phase 1/2 MDNA11 ABILITY study, our programs are designed to fuel sustained growth of our pipeline as we endeavor to advance innovative cytokine-based therapies for patients with unmet medical needs.”

Uddin anticipates Medicenna will start generating revenue in 2022 at $750,000 exclusively from licensing, with that figure projected to grow to $25.5 million annually from 2023 through 2025. Uddin then projects the company to begin receiving royalties from 2026 onward, beginning a revenue ramp projected to reach $153.4 million in the 2032 fiscal year.

Meanwhile, Uddin projects the company’s EBIT loss of $25.9 million in 2022, followed by positive EBIT at $818,000 in 2023 and $257,000 in 2024. After one more year of negative EBIT projection in 2025 at $326,000, Uddin forecasts the EBIT to follow a similar trajectory to revenue, eventually growing to $128.8 million by 2032 for a margin eclipsing 80 per cent.

Medicenna Therapeutics’ share price has fallen by 53.4 per cent for the year to date, with the high point for the year coming on January 25, when the company’s share price reached $5.79.

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About The Author /

Geordie Carragher is a staff writer for Cantech Letter
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