I stumbled upon MEI Pharma Inc (NASDAQ:MEIP) after reading over the American Society of Hematology (ASH) abstracts at the end of last year. What really caught my eye was the unprecedented clinical activity illustrated in clinical trial results from their best-in-class histone deacetylase (HDAC) inhibitor Pracinostat in hematologic diseases Myelodysplastic syndrome (MDS) and elderly Acute Myeloid Leukemia (AML). In a small pilot study at MD Anderson, complete response (CR/CRi) rates of 90% (9/10) were observed in MDS patients when combined with the hypomethylation agent Azacitidine.
I urged investors to buy the stock in anticipation of the run-up to the Phase 2 MDS results. As anticipated, the stock increased ~80% in less than 2 months, which was too much for me to pass up. Unfortunately, the trial did not meet its primary endpoint of complete response rate due to the high number of patient discontinuations in the treatment arm.
However, AML is a completely different story as the data released last week in an abstract from the elderly AML Phase 2 trial for the European Hematology Association (EHA) meeting was more than impressive, being some of the best I’ve seen for this hard to treat cohort. I’ll explain below why hope is not lost for Pracinostat in MDS and why elderly AML has a much better chance of success. With Pracinostat heading into Phase 3 for elderly AML, a promising drug pipeline which includes clinical stage candidates MEI-344 (mitochondrial inhibitor) and PWT143 (PI3K delta inhibitor), $70M in cash and a market cap of only ~$70M, now is a great time to invest.
Pracinostat in MDS – What was learned?
The FDA approved hypomethylation agent Azacitidine achieved a clinical response rate of only 16% in MDS in Phase 3 trials. At MD Anderson Cancer Center, early pilot studies in MDS using Pracinostat in combination with Azacitidine achieved a complete response rate (CR/CRi) of 90% (9/10 patients). Due to the stellar results from the pilot study, MEI Pharma initiated a double-blind Phase 2 trial enrolling 102 patients at 19 sites comparing Pracinostat in combination with Azacitidine to Azacitidine alone in front-line intermediate and high-risk MDS patients. Investors, including myself, were surprised when the recently released top-line data from the Phase 2 trial illustrated that the combination treatment was no more effective in inducing complete responses than Azacitidine alone. In the weeks following, it has been revealed that the unusually high discontinuation rate seen in the Pracinostat combo cohort was the culprit for the disappointing results.
The combination treatment initially results in a worsening of condition with myelosuppression, fatigue, and gastrointestinal toxicities being the main reasons for dropout. In fact, ~25% of patients in the Pracinostat treatment arm had discontinued the study by only the second cycle of treatment. However, the pilot study revealed that if patients stayed on the drug long enough, they finally did recover and had good outcomes. Open label pilot studies performed at world-renowned cancer institutions like MD Anderson, where patients have best of care and are able to withstand the initial side effects due to patient hand-holding, are often not reproducible when opened up to a larger number of treatment centers unfamiliar with the drug, and blinded to treatment. Despite not hitting the primary end-point of complete response rate, I believe the most valuable data will be found in the secondary end-points and may provide a lifeline for Pracinostat in front-line MDS.
It has been noted numerous times by Dr. Garcia-Manero of MD Anderson that the responses seen with the combo treatment were deep responses. It is possible that the overall response rate, the duration of response, progression free survival or rate of AML transformation is affected positively. In accordance, at the recent Bank of America conference, CEO Dr. Gold stated that the trends are looking favorable for those patients who stayed on the drug. How can a drug improve these secondary endpoints but not have a significant impact on response rate? Novartis recently received FDA approval for its HDAC inhibitor Farydak in multiple myeloma patients who had received two prior treatment regimens. The overall response rate in the study was not statistically significant although there was a progression free survival advantage of 3.9 months resulting in approval. Full data on the MDS Phase 2 trial will be presented at the end of the year, likely at ASH.
Pracinostat Results Impressive in AML
There are numerous reasons why Pracinostat has a higher probability of succeeding in elderly AML than MDS. First, elderly AML is a much more severe disease than MDS and patients and doctors are much more willing to withstand the initial side effects. In elderly AML, where overall survival is measured in weeks and months, doctors are trying to prolong life compared to MDS where doctors are trying to improve quality of life. Likewise, there are other drugs available to treat MDS patients where the options are severely limited in elderly AML where there currently is no standard of care. Second, Pracinostat has shown single agent activity in AML with ~14% complete response rate in a Phase 1 dose escalation study (2/14). No single agent activity exists in MDS. Perhaps most important are the impressive results released last week, which illustrate significant clinical activity in elderly AML in a large Phase 2 trial.
The open-label Phase 2 trial in front-line elderly AML enrolled 50 patients at 15 cancer centers with a primary endpoint of complete response (CR+CRi+MLFS) when treated with Pracinostat and Azacitidine. The EHA abstract illustrates extremely impressive complete response rates and minimal discontinuations. Out of the 47 patients currently available for evaluation, the primary endpoint has been reached for a remarkable 47% (22/47) of patients with 30% (14/47) of them being a full CR. These response rates could increase as 30 patients still remain on the drug. Importantly, the majority of responses occur quickly, within the first 2 cycles.
*Slide from Bank of America Health Care Conference May 2015
This is much faster than 4-5 cycles seen historically with Azacitidine alone. Speed to response is important when dealing with elderly AML where survival is measured in months. Extremely encouraging is the durability of the responses, with no patients experiencing a response progressing to date, with some patients already on the drug for over a year. As expected, unlike the MDS trial, the discontinuation rate due to adverse side effects was low at ~14%.
*Slide from Bank of America Health Care Conference May 2015
To truly appreciate the 47% complete response rate observed in the Pracinostat combination Phase 2 trial, one must analyze the data from previous clinical trials for Azacitidine in elderly AML. At EHA 2014, data from AML001, a global, multi-center, randomized study including 488 elderly AML patients, showed a 20% complete response rate (CR/CRi). Other Phase 2 and Phase 3 clinical trials have shown complete response rates with Azacitidine alone ranging from 7-18%. A large retrospective analysis of 155 AML patients in the Austrian Azacitidine Registry revealed a complete response rate of only 13%. Likewise, a recent Phase 2 study in which 29 elderly AML patients were treated with a combination of Azacitidine and the HDAC Panobinostat had a complete response rate of 10%. To date the 47% complete response rate seen in the Pracinostat and Azacitidine Phase 2 trial is the best to date.
Even more impressive is that 30% of these responses were full complete responses. This bodes extremely well for overall survival outcomes as the degree of response has been statistically linked to survival. I am eagerly awaiting the full data that will be presented at EHA in June. I fully anticipate the survival data to be positive as the company and MD Anderson stated in the abstract that the data warrant definitive evaluation in a Phase 3 study.
Financials and Risks
When playing small cap biotech stocks, the rewards are high but so are the risks. Small cap biotech regularly swing wildly in either direction as evidenced by the ~80% run-up to the MDS data and the ~70% drop following the disappointing results. The large cash position and drug pipeline buffer some of this risk. The valuation of MEI Pharma is significantly low, with a market cap of under $65M, which is $5M below cash on hand. Therefore, currently investors are not placing any value on the drug pipeline. Importantly, MEI Pharma owns the full rights to all their drug compounds, including Pracinostat and have stated that cash on hand is sufficient until the end of 2017. However, the continuation of drug trials for Pracinostat to Phase 3 and their other two compounds will certainly eat up a significant portion of cash going forward. There is also little confidence in management at this point as most are disappointed more was not done to anticipate the discontinuation rate in the MDS trial and provide more education and avenues for participating clinics to navigate toxicities.
The Phase 2 data just released for Pracinostat in elderly AML should provide investors confidence that many of the issues that plagued the MDS Phase 2 study are not a concern in this indication. The addition of Pracinostat to Azacitidine in elderly AML appears to more than double the complete response rate historically seen with just Azacitidine alone. It should also be re-assuring that the Phase 2 data includes 50 patients from 15 different cancer centers and that the discontinuation rate is rather low. In my opinion, now is a good time to buy MEIP, as I would expect another run-up following the June EHA presentation and update of the MDS data later this year. The abstract data went largely unnoticed but for the reasons mentioned in this article, I would expect a rebound in the stock as investors familiarize themselves with the data and elderly AML field. With several drugs in the pipeline, a hoard of cash, and the initiation of a Phase 3 trial for Pracinostat in elderly AML, now is a good time to buy the stock for cheap. Analyst Cantor Fitzgerald has placed a $14 price target on the stock based on the AML data, but I believe a more realistic target is $6, which still provides 200% upside.