MEI Pharma Inc (NASDAQ:MEIP) just received Breakthrough Therapy Designation for its key pipeline drug pracinostat, anti-tumor molecule inhibitor that combined with azacitidine treats patients with newly diagnosed acute myeloid leukemia (AML) who are aged over 75 years or ineligible for intensive chemotherapy. Between news of the designation paired with acceptance from the FDA for a proposed Phase 3 design, on the surface, MEI Pharma appears to be in great standing.

However, Wedbush analyst David Nierengarten continues to be neutral, noting, “…we remain cautious on shares as financing remains to be secured to conduct the study.” With positive clinical success but questionable financial backing to support the next stages, Nierengarten reiterates a Hold rating with a price target of $2.00, marking an almost 37% upside from where MEIP shares last closed.

What makes pracinostat special as a unique treatment for AML cancer is that it targets patients recently diagnosed, but would be otherwise past the ideal age or considered suitable to receive chemotherapy. Phase 2 for pracinostat proved to be promising, as the oral HDAC inhibitor revealed favorable synergistic activity. Meanwhile, the combination of pracinostat blended with azacitidine so far demonstrates to be both safe and well-tolerated. Yet, Nierengarten highlights a concern whether pracinostat will also prove to be as successful commercially as it is clinically when it comes to achieving sales and earnings estimates.

Nierengarten details his concerns, “We believe it could take two years for the study to fully enroll, and two-to-three years for top-line readout. We estimate the cost of funding the study could reach $30M, which would necessitate either a partner or a dilutive financing; we currently expect the latter is likely, although the release of final Ph 2 data could make a partnership more likely. The company ended March 31 with $49M in cash and equivalents.” From Nierengarten’s calculations, it could take up to two years for the Phase 3 study to fully enroll, putting MEIP in a position to likely need dilutive financing or on the back of successful final Phase 2 data, a partnership. For now, Nierengarten keeps a watchful eye on MEIP shares.

As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, David Nierengarten is a top five-star rated analyst. The analyst is ranked #37 out of 4,071 analysts, upholding a 49% success rate and yielding a high average of 33.5% in his annual returns. However, Nierengarten on average loses 24.4% when recommending MEIP.

TipRanks indicates that in the last 12 months, two analysts have rated a Buy on MEIP shares, with one maintaining a Hold.

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