HCW starts MEI Pharma at buy; PT $10

H.C. Wainwright initiated coverage of MEI Pharma (NASDAQ:MEIP) with a “buy” rating and $10 price target. The stock closed at $2.11 on Dec. 19.

“We believe MEI Pharma is building an oncology franchise on a robust pipeline that is diversified on multiple layers, yet highly synergistic,” writes analyst Andrew Fein.

MEI has four clinical-stage drug candidates in its portfolio, including pracinostat, which is in an ongoing global registration trial, and ME-401 that is entering a Phase 2 clinical trial, the results of which the company intends to submit to the FDA in support of an accelerated approval marketing application.

Mr. Fein said MEI’s pracinostat partnership with Helsinn Healthcare might generate milestone payments and royalties, which should support MEI's internal programs and minimize dilution, while the ME-401 programs are forming the cornerstone of the company’s long-term value.

“We have conservatively modeled for a probability of success of 10% in relapse/refractory chronic lymphocytic leukemia and 20% in relapsed/refractory follicular lymphoma, based on historical success rates of Phase 1b/2 studies (about 8%) and our favorable view of the programs,” he said.

Mr. Fein noted that “an increase of ME-401’s probability of success to 30% in both programs would shift our price target up to $20, representing significant upside to our thesis.”

Stephen Kilmer