On May 2, 2016, Marinus Pharmaceuticals Inc. (NASDAQ:MRNS) reported that it was gearing to release topline results from a phase II proof of concept trial in its Fragile X syndrome candidate, Ganaxolone. Fragile X syndrome is a genetic disease where a patient cannot produce the Fragile X Mental Retardation protein required for normal mental development. This likely means we will see the data hit markets at some point during the week ahead.
The science behind this one is more conceptual than technical, simply because we don’t really know why this type of drug works in the way that it does. It has been demonstrated to be effective in preclinical studies, and Marinus is attempting to replicate this efficacy in human trials.
It’s part of a family of drugs called CNS-selective GABA modulators. They work by binding to synaptic receptors called GABA receptors, which are the receptors that play a key role in neurotransmission across synapses. When a patient has a seizure, the primary symptom of Fragile X that the company is targeting for treatment, the GABA receptors become overexcited and essentially stop everything from working as normal in the brain. Inhibition of the receptor activity works by opening a pore that allows chloride ions to flow into the receptor. This is essentially what barbiturates do.
The current versions of the drugs that act in this way were not intended for chronic use though. They can turn into progesterone, known as the pregnancy hormone, which is not good for boys whom Fragile X generally affects. They can also turn into other steroid type compounds, and in turn, induce some pretty serious side effects if used chronically. Ganaxolone is designed to have the inhibitory effects of the current standard of care, but it can’t revert back to a steroidal state. This makes it a potential candidate for chronic use in a whole host of indications – epilepsy, comorbid seizures and Fragile X.
There has not been any human trial data to support the use of this drug in Fragile X. The upcoming phase II data is the first of its kind, a proof of concept study, and as such, the data is very hard to preempt. We do know that preclinically there is some evidence that the inhibition of GABA excitement stops seizures in Fragile X, and so the trial is not completely unsupported, but that’s pretty much it as things stand.
The primary endpoint of the current trial is based on the Clinical Global Impression Rating Scale for Improvement (SGIRSI). It’s a symptom severity treatment that offers up a score on a scale of 1 to 7, with low scores seen as positive and higher scores negative.
As such, from the baseline established score, we are looking for a reduction in CGIRSI in the patients under investigation as an indication that the drug is effective.
Fragile X is the most common form of inherited mental disability, and has an incidence rate of around one out of 4,000 males and one out of 8,000 females in the US. Ganaxolone will likely be targeting the seizure element of the condition rather than the condition itself, but this doesn’t really limit its population, as seizures are a common side effect and can be severe – severe enough to justify a chronic treatment if it is commercially available.
With this in mind, and with the above mentioned incidence rate, Marinus wouldn’t have to price its Ganaxolone candidate at too high a cost for it to become a large revenue generator, circa $500 million – $1 billion annually with a decent market penetration.
Reaction, Valuation and Trading Strategy
The reaction to positive data probably won’t be all that pronounced for this one, primarily because its very early stage data (it’s phase II, but proof of concept nonetheless) and the drug only makes up a small part of Marinus’ pipeline. Its primary target indication is epilepsy, and that’s what markets will be doing most of the buying and selling of Marinus stock based on. This doesn’t mean there won’t be a reaction, however. The drug is targeting a wide population, and could be a rewarding product going forward in a space that is severely lacking in treatment options. Proven efficacy would probably return a 10-20% upside on the company’s current market capitalization of $85 million. Downside for non-efficacy is likely similar, perhaps not quite so pronounced. 10-15% short looks reasonable if the drug is proven ineffective, or unsafe.