XLO - Medicenna: Presenting Data Next Week Plus A Clinical Update Next Quarter

2023-08-01 15:49:41 ET

Summary

• MDNA failed to report data from the fifth dosing cohort, of its phase 1/2 ABILITY study of MDNA11, in Q2'23 as expected.
• The company is instead presenting data from both the fifth and sixth cohorts of the trial on August 9, 2023.
• MDNA has cash to last through Q3'24, meaning that is less of a concern right now. However, competitors such as XLO and HOWL are set to produce data in H2'23.

When I last wrote about Medicenna Therapeutics ( MDNA ) in February 2023, I rated the company a strong buy based on the potential for a run-up, particularly in Q3/Q4 2024, when MDNA is set to announce additional data from its phase 1/2 study of MDNA11 various cancer types. This article takes a look at the changes to the schedule.

The ABILITY trial

MDNA's phase 1/2 ABILITY study of MDNA11 (a modified form of interleukin-2, IL-2) in various cancer types, has already produced data from the first four dose cohorts of MDNA11 (3, 10, 30 and 60 ug/kg). One patient achieved a partial response and others saw stable disease, which is meaningful given the heavily pre-treated patients in the trial. On March 30, MDNA provided an update from the ABILITY trial and noted that it would report data from the fifth dose cohort (90 ug/kg) in Q2'23.

Medicenna expects to report initial anti-tumor activity data from ABILITY's fifth dose escalation cohort at a medical meeting in the second quarter of 2023. Early anti-tumor activity data from ABILITY's sixth dose escalation cohort and Phase 2 single-agent expansion portion are expected in the third quarter of 2023. Early anti-tumor activity data from ABILITY's combination arm evaluating MDNA11 plus pembrolizumab are expected in the fourth quarter of 2023.

MDNA's guidance for reporting from ABILITY, March 30, 2023, press release.

Unfortunately, Q2'23 came and went without the anti-tumor data from the fifth dose cohort in the ABILITY trial. MDNA's recent earnings , however, came with news that on August 9, the company would be presenting data from the fifth and sixth (120 ug/kg) cohorts of the trial. As such, the timing of the sixth cohort data hasn't changed, meaning the entire timeline for results hasn't shifted, even if the fifth cohort data is late. MDNA also confirmed the conference call would name the recommended dose for the monotherapy phase 2 portion of the study, which is set to commence in Q3'23, with a clinical update being reported from the phase 2 study in Q4'23.

With regards to the combination work with pembrolizumab, MDNA said it planned to initiate that in Q4'23. There has been a slight shift in that timeline as the March 30, 2023, press released suggested we would already see data from the combination of MDNA11 and pembrolizumab in Q4'24.

Financial Overview

For the quarter ending June 30, 2023, MDNA reported a net loss of C$2.9M. R&D expenses were C$2.8M during the quarter and G&A expenses were C$1.6M. The company had cash, cash equivalents and marketable securities of C$29.6M at the end of the quarter, and the net decrease in cash from the end of the previous quarter was C$4M, so MDNA could operate for another seven quarters at that rate. While the start of phase 2 work could increase cash burn, I think MDNA's cash runway guidance of Q3'24 is reasonable. With 69M shares outstanding he company current has a market cap of $35.5M USD ($0.51 per share on the Nasdaq at the time of writing).

The fully diluted market cap based on another 22M shares worth of warrants and options is $46.7M USD. The fully diluted data is relevant given the warrants have exercise prices between US $1-$2, if MDNA produces positive clinical data, a return to those prices is certainly feasible.

The options have a weighted average exercise price is US $1.82 and the weighted average remaining contractual life is 5.27 according to MDNA's recent 6-K filing (Exhibit 99.1).

Conclusions, Competitors, and Risks

Conclusions

Despite the delays seen with MDNA, pushing data back one quarter is slightly more palatable for a company that operates so efficiently in terms of expenses. Given the fact MDNA11 already produced a partial response in pancreatic cancer, I remain upbeat about its prospects of producing efficacy data that excites the market as it treats additional patients. Indeed, as MDNA moves into a phase 2 with patients who are less heavily treated, I think the chance of seeing some responses in conditions where standard IL-2 isn't approved, and responses might not be expected, are even higher. I retain my Strong Buy rating on MDNA.

Risks and Competitors

There are several risks to any long in MDNA, a few of which I've discussed here. Firstly, the data from the fifth and sixth cohorts could disappoint. While the patients MDNA has been enrolling have been heavily pre-treated, and stable disease could actually be considered promising, the market might be wanting to see some partial or complete responses.

Another risk with MDNA as we saw in Q2, is that there can be delays in reporting data, which can cause investors to sell.

Lastly, competitors are due to report data in H2'23 which could impact the perception of MDNA's potential market share. I've written previously about Werewolf Therapeutics ( HOWL ), which is set to report data in Q4'23 from a phase 1 trial of WTX-124, its own modified form of IL-2, in various cancer types.

Xilio Therapeutics ( XLO ) is another competitor of note. The company's engineered IL-2, XTX202, is currently in a phase 1/2 trial in advanced solid tumors. According to XLO's Q1'23 earnings press release , the company is already dosing patients at a sixth dose level (2.8 mg/kg) in the phase 1 portion of its study, where the fifth dose level (1.4 mg/kg) has been cleared. XLO is planning to report preliminary anti-tumor activity data from the phase 1/2 trial of XTX202 in Q3'23.

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