Shares of Marinus Pharmaceuticals (NASDAQ: MRNS) dropped over 20% today after the company announced second-quarter 2018 results and provided an update on the state of its business. As an early-stage drug developer, there isn't much to report in terms of financial performance. The company doesn't generate revenue of any kind, so investors are more concerned with the cash position and with how much cash is burned in operations.
Therein may lie the problem. Marinus Pharmaceuticals exited June with approximately $46 million in cash and cash equivalents. Management said it expects that amount of cash to be sufficient to fund operations into 2020. Wall Street is raising eyebrows at that statement, as the biopharma has four studies in phase 2 or later. More importantly, it just delayed the data readout from one study, now expecting to provide an update in the fourth quarter of 2018 instead of the third quarter.
As of 2:21 p.m. EDT, the stock had recovered significantly, settling to a 6.6% loss.
On one hand, the math does work out to support management's statement. Marinus Pharmaceuticals burned through about $11 million in cash in the first half of 2018. Maintaining an equivalent rate of cash burn, its $46 million would fund about eight more quarters of operation, through June 2020.
On the other hand, running mid- and late-stage clinical trials will be expensive. That suggests that the rate of cash burn will accelerate, and that $46 million might go quicker than investors may think. Furthermore, considering Marinus Pharmaceuticals has no track record to speak of (it was a penny stock not that long ago), Wall Street is worried that the recent data release delay is a sign of inexperience, and therefore more risk during this critical time in the company's history.
A single one-quarter delay isn't the end of the world, and doesn't seem to jeopardize the balance sheet. The real driver of the stock and the company's fate will be the performance of its one and only drug candidate ganaxolone. If it continues to perform well in clinical trials, then raising money -- or finding a development or commercialization partner -- will be relatively easy to do.
Marinus Pharmaceuticals has ridden the drug candidate this far, but investors are hoping for even better things to come. They may get an answer in the fourth quarter of 2018, when top-line data are reported for two of the four ongoing studies.
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