MethylGene: Upside Hinges On Clinical Data

MethylGene’s (MYG.TO) C$26.1m private placement extends its cash runway into H214, which should allow it to reach key de-risking catalysts for both lead clinical programmes over the next year. The first of these is proof-of-concept data of the antifungal MGCD290 in vulvovaginal candidiasis (VVC); the second is data from a dose expansion of the anticancer MGCD265 in non-small cell lung cancer.

MGCD290 offers synergistic potential to azole therapy
MGCD290 is being developed as an add-on to fluconazole for severe/resistant fungal infections. It targets the Hos2 enzyme, which modulates ergosterol synthesis. Since fluconazole inhibits ergosterol via ERG11p, the two compounds could be synergistic. Azoles are often used in VVC, but recurring or resistant cases (affecting up to 5% of women) could benefit from a two-pronged attack.

Proof-of-concept MGCD290 Phase II data can unlock value
Results from a 150-patient Phase II trial comparing fluconazole ± MGCD290 in moderate-to-severe VVC are expected in Q113. An improvement in the 28-day therapeutic cure rates would de-risk the programme substantially and pave the way for pivotal trials (and a possible 2016 launch). Future studies are envisaged in onychomycosis and invasive fungal infections.

MGCD265 promising safety so far in a validated target
Meanwhile, the Met/VEGFR inhibitor MGCD265 is in dose ranging studies and has not yet reached its MTD. This will be followed by a dose expansion in NSCLC, examining two, two-drug combinations in parallel: MGCD265/erlotinib and MGCD265/docetaxel. Objective responses have been observed to date in NSCLC, prostate cancer and endometrial cancer. Of 12 evaluable NSCLC patients, two achieved partial remission and eleven achieved disease control. However, MethylGene will have to differentiate the drug from Exelixis’s dual MET/VEGFR inhibitor, cabozantinib (in two Phase III in mCRPC plus 10 Phase II trials).

Valuation: ~C$40.5m EV, upside hinges on clinical data
MethylGene’s current valuation (EV of C$40.5m) is a reasonable reflection of the portfolio, but there is strong upside possible from a positive PoC result for MGCD290. Expansion cohort MGCD265 data in 2013 could also drive value.

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