MIST - Milestone Pharmaceuticals: Looking Attractive After Drop On Positive News

Summary

• Milestone Pharmaceuticals reported positive data from the RAPID arm of its pivotal trial.
• After an initial premarket spurt, the stock dropped drastically.
• Since I cannot find a plausible negative reason, I think this makes the stock attractive.

I covered Milestone Pharmaceuticals ( MIST ) in 2019. Since then, there's been no other coverage of the company. Recently, the stock went up 31% premarket after the company's once-failed heart failure drug saw success in a phase 3 trial, only to fall back drastically in the market on high volume. The company's lead asset is called etripamil, and it reached the primary endpoint in a Phase 3 trial for patients with the heart condition paroxysmal supraventricular tachycardia (PSVT). The disease has a few approved treatments, however standardly, beta blockers and calcium channel blockers are used by physicians, and sometimes catheter ablation are used. Catheter ablation, a minimally invasive procedure, is becoming increasingly common these days due to its long term benefit, short hospital stay, low pain quotient, and high efficacy.

For many PSVT patients, using medication may not be the most optimal procedure. Cleveland Clinic suggests catheter ablation as second line treatment for many patients:

Catheter ablation is not usually the first line of treatment for people with arrhythmias, such as AFib. But if you have tried at least one medication to control your arrhythmia, without success, your cardiologist may recommend catheter ablation.

Catheter ablation is a minimally invasive procedure that usually doesn't require a prolonged hospital stay. It can offer success beyond medical therapy for many people. If you have an arrhythmia that isn't controlled with medications, catheter ablation can restore normal heart function and can even be lifesaving in some cases.

In my earlier coverage, I said that while etripamil was interesting, it was not well-differentiated from generic competition. Etripamil is just another calcium channel blocker, something that's already used to treat PSVT. Yes the company does highlight some attractive aspects of etripamil - fast onset, shorter half life, convenient administration - however its pivotal trial, comparing the drug to placebo, does not tell us why we should not be using calcium channel blockers off the shelf. All 8 trials listed on the registry either compare the drug with placebo, or are single arm trials using a nasal spray device. That could be a difference, as could self-administration. However, millions of Americans are treated with CCBs every year, and there's not a lot of pricing power even for an FDA-approved drug unless it can show considerable difference directly in a trial.

At the least, the drug will not have pricing power unless it can actually produce such a differentiation; at worst, it will simply be ignored. This was my position in my earlier coverage, and I believe this needs some modification.

In this regard, I should quote a comment from a reader of that article which gives a different view:

Your claim that etripamil nasal spray has no significant differentiation from generics is not true. Verapamil (oral) is only approved for SVT prophylaxis and it's not effective in treating PSVT. For PSVT, first-line medication is adenosine IV and then verapamil IV, both of which need to be performed in the hospital. However, etripamil nasal spray is designed for outpatient use and it has comparable efficacy and fewer side effects regarding hypotension and AV block.

Patients with a PSVT episode may not have an immediate access to ER for those IV drugs, while etripamil nasal spray provides a life-saving immediate control of PSVT and may avoid ER visits.

Much of this comment is correct. A quick quote from John Carroll of Endpts highlights an interesting angle about lower ER visits:

The statement from Milestone also says that another key endpoint, a significant reduction in ER visits, was achieved on pooled date for both pivotal clinical trials. A spokesperson tells me the combined data reflect a 39% reduction in visits and a p-value of 0.035. I've asked what the pivotal data from the most recent study alone look like on that score - the basis for an economic benefit they'll ultimately need to outline to payers if they expect to sell it - but I haven't heard back yet.

Coming back to the trial, in March 2020, etripamil failed a pivotal trial called NODE-301. The trial found the drug - a self-administered calcium channel blocker - did not beat placebo in converting the arrhythmia supraventricular tachycardia to sinus rhythm five hours after treatment. The stock collapsed; however, a few months later, Milestone spoke to the FDA and changed the trial into a two-part trial, which included NODE-301. The second part of the trial, called RAPID, allowed repeat dosing 10 minutes after the first dose if the patient did not show any improvement, and also changed the primary endpoint to conversion within 30 minutes.

The switch was fortunate because a post hoc analysis of NODE-301 did show that 54% of etripamil patients converted within 30 minutes, compared to 35% patients in the placebo group. Indeed, the 706-patient RAPID actually improved upon these data, coming up with 64.3% and 31.2%, respectively, which amounted to a p-value less than 0.001. Even the median time to conversion for the drug arm was 17.2 minutes versus 53.5 minutes for placebo. [The company recently did a late-breaking presentation of RAPID data at AHA 2022.]

The drug was quite well tolerated, with no serious adverse events or drug related treatment discontinuations in either arm.

These are outstanding results, and the company plans to file with the FDA in mid-2023. Some analysts are very upbeat, with peak sales estimates of $500mn. However, the market enthusiasm was lackluster after that initial spurt. It could also be tremendous profit taking, given the unbelievable drop in price - on high volume - after positive data.

Financials

MIST has a market cap of $156mn and a cash balance of $82mn, including cash, cash equivalents and short term investments. Research and development (R&D) expense for the second quarter of 2022 was $10.7 million, and General and administrative (G&A) expense was $3.9 million. The company manages its cash well, even at phase 3. At this rate, they have enough cash for a 6-7 quarter runway.

Bottomline

MIST actually looks attractive to me after the terrible drop post phase 3. They have cash, they will file an NDA in 6 months, they have good data, and they are valued quite low. All these are solid ingredients for a speculative biopharma investment.

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