MethylGene (MYG-TO, MYLGF-OTC): Initiating with an
Grant Zeng, CFA
We are initiating coverage of
with an Outperform rating. Our 12-month price target is $0.75 per
MethylGene is a mid-stage development biotech company focused on
development and commercialization for the treatment of fungal
infections and cancers. The Company has two differentiated lead
candidates MGCD290 and MGCD265 for fungal infections and cancers
in combination with fluconazole has entered into Phase II clinical
trial targeting vulvovaginal candidiasis, both acute and recurring.
MGCD290 is a first-in-class selective, oral, small molecule
inhibitor of the fungal Hos2 enzyme; works in synergy with azole
antifungal agents; has broad spectrum antifungal activity; can
reduce drug resistance.
We expect MGCD290 will enter into pivotal Phase III trial in 2013.
We model the FDA approval of MGCD290 in 2015. Due to the advantages
of MGCD290 in combination of fluconazole, the combination will
command a significant market share from currently used antifungals.
Also, fluconazole is the most widely used antifungal, which will
drive the usage of MGCD290;
is a multi-targeted kinase inhibitor in multiple Phase I and Phase
I/II clinical trials. This agent is well tolerated and has a
favorable safety profile. Early signs of significant clinical
activity have been observed in gastric cancer and NSCLC patients
when combined with docetaxel or erlotinib. We estimate MGCD265
could enter into Phase III study in 2014 and the FDA approval could
happen in 2017.
In addition to MGCD290 and MGCD265, MethylGene has also diversified
programs under development with some of them developed by its
partners. These programs provide a long term growth potential for
MethylGene has a strong balance sheet. We forecast that the current
cash can last through the 4Q2013. No debt is sitting on its balance
sheet as of March 31, 2012.
Current valuation is attractive.
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