Marinus Pharmaceuticals Inc. (Nasdaq:MRNS) was among the top advancing issues last week, soaring 31% to $4.10. Investors pounced on shares after the Radnor, PA-based drugmaker announced that top-line data from its Phase 2 open-label study in patients with CDKL5 disorder support advancing ganaxolone, a small molecule, into a definitive late-stage clinical trial.
Oral ganaxolone, in addition to baseline treatment, showed a sizable and durable seizure-frequency reduction in the majority of patients, with some achieving an increase in the number of seizure-free days and reporting behavioral benefits.
CDKL5 is a rare X-linked genetic disorder that results in early onset, difficult to control seizures, and severe neurodevelopmental impairment. There are no approved or effective available treatment options. Marinus plans to meet with regulatory agencies to obtain agreement on the clinical development plan that would be needed for approval of ganaxolone for CDKL5 disorder.
Yes, it’s a micro-cap at $136.5 million. But let’s zoom-in on some information hiding under most analysts’ radar.
Orrin Devinsky, MD, Director of the NYU Langone Medical Center’s Comprehensive Epilepsy Center and Principal Investigator in the current Marinus study, commented, “I am impressed with the magnitude of seizure reduction and gain in seizure-free days seen with ganaxolone treatment in children with this highly refractory epilepsy. The durable anti-epileptic effect seen in several children distinguishes ganaxolone’s efficacy from the more than 20 currently available anti-epileptic drugs that provide limited seizure control lasting a few weeks to months.”
Dr. Devinsky added, “When treating children with the severest forms of epilepsy such as CDKL5 disorder, there is a desperate need for new drugs that are well-tolerated, efficacious and easy to administer with no need for special monitoring. With no other treatment showing this degree of promise, I am excited to lead the effort to advance ganaxolone into potentially the first, late-stage clinical trial in children with CDKL5 disorder.”
How were Marinus’s earnings last quarter?
The company posted its results August 1st. It reported ($0.21) EPS for the quarter, topping the Zacks’ consensus estimate of ($0.27) by $0.06. Not mind boggling, but positive.
What do the analysts’ think?
Two brokerages have issued 12-month price objectives for Marinus shares. Their forecasts range from $3.00 to $11.00. On average, they expect Marinus’s share price to reach $7.00 in the next year. That’s an upside of 60%.
Most importantly with this name, consider that there are no approved or effective available treatment options for CDKL5 disorder. Marinus’s treatment, if approved, would be the first.
Also, there’s the apparently unnoticed Marinus pipeline. Ganaxolone, through its validated GABAA mechanism, has other opportunities with post-partum depression, where two studies are in Phase 2, and in orphan status for acute epilepsy in another Phase 2 trial.
As with so many other promising meds that ultimately fail in Phase 3, and importantly, there is absolutely no guarantee that ganaxolone will succeed in the clinical indications mentioned above or regulatory agencies will approve it. It might not be used widely by prescribing clinicians or reimbursed by insurers. Side effects like sedation and dizziness might limit long-term use. The company might need cash soon to continue its developmental programs, which might lead to additional debt and/or shareholder dilution.
But when the day is done, this name is a Buy at this price, but only for the high-risk tolerant investor who can afford to see the investment go poof.
Then, there’s McKesson Corp. (NYSE:MCK). Totally different scenario.
With its shares down over 7% the last week on no particular news, McKesson continues to be uninspiring. Question is, why?
Paul Price at Seeking Alpha believes the long-term picture suggests today’s price of $148.37 is a bargain. I agree with him, and he’s got plenty of other company.
Analysts think an EPS revival is at hand starting in 2018.
McKesson is a prime example of a company offering big potential gains due to the public’s perception that its business model is in jeopardy. McKesson is on pace to post more than $200 billion in FY 2017 revenues, more than ever (fiscal year ends Mar. 31, 2018). The shares scaled a peak above $234 back in 2015. They rallied to more than $197 last year.
EPS are expected to dip slightly this year, from $12.88 to about $12.07. That disappointment may have obscured the company’s superior longer-term track record. McKesson’s share price has done well but it fails to reflect anywhere near the past decade’s true growth in fundamentals.
The broader market remains skeptical, but analysts see FY 2017 as nothing more than a small thud. Consensus views for FY 2018 now project EPS of $12.89. Value Line thinks earnings could reach more than $20 per share by 2022.
Remember that McKesson broke through $214 in both 2014 and 2015 when fundamentals were less favorable than they are today.
Price goes on to note that Standard and Poor’s research upholds the idea that the company can see profits rebound next year. They call current fair value as $220.30, while conservatively seeking a share price of $172 over the coming 12-months. McKesson falls into S&P’s top 2% in terms of “investability,” a measure of quality.
Independent analysis from Morningstar goes further. They label McKesson a 4-star (out of 5) Buy and would upgrade to their very top rating should the shares dip below $147. Its view of McKesson’s fair value runs around $210.
McKesson is a blue-chip company at a decidedly white-chip valuation right now, says Price. (What happened to red-chip?) He recommends buying shares, selling some puts, or doing both.
What do the analysts think?
As of September 15, 2017, the consensus forecast among 17 analysts covering McKesson advises investors to Hold their position in the company. This has been the consensus forecast since the sentiment deteriorated on Oct 28, 2016. The previous consensus forecast advised that McKesson Corporation would Outperform the market.
Share price forecast
The 12 analysts offering 12-month price targets for McKesson have a median target of $171.00, with a high estimate of $189.00 and a low estimate of $155.00. The median estimate represents a 15% increase from the last price of $148.37.
McKesson is a large-cap equity at $31.5 billion, with a soothing beta of 1.16, meaning it’s not particularly volatile when compared to the broader market. For the risk-averse investor, a 12-month upside of at least 15% from 12 analysts makes this a no-brainer Buy at its current price.