Stifel Doubles Down On MEI Pharma, Considers ME-401 'Best-In-Class'

MEI Pharma Inc MEIP is down 31.5 percent from its one-year high struck after the release of preliminary data for ME-401.

Stifel Nicolaus considers the decline a stake-building opportunity.

The Analyst 

Analyst Stephen Willey upgraded MEI from Hold to Buy and raised the price target from $2.50 to $7.

The Thesis

ME-401 justifies a bullish stance, Willey said: the candidate demonstrated a 90-percent overall response rate in patients with relapsed or refractory B-cell non-Hodgkin lymphomas. (See Willey's track record here.) 

“We believe year-end 2018 updated Phase 1B ME-401 data is likely to solidify ME-401 as a best-in-class compound and believe the planned year-end 2018 initiation of a pivotal single-arm/monotherapy trial in third-line follicular lymphoma should provide a clear runway to commercialization with minimal underlying development/regulatory risk,” the analyst said. 

The drug is considered a market share threat to existing rivals, including Gilead Sciences, Inc. GILD’s Zydelig/idelalisib or Bayer’s Aliqopa/copanlisib. Stifel estimates peak U.S. sales in R/R FL beyond $300 million, which would contribute $5 per share in discounted cash flow.

At the same time, MEI’s CDK9 inhibitor voruciclib is a source of long-term optionality in potential combination therapies with venetoclax, Willey said. 

Stifel is less optimistic for pracinostat in acute myeloid leukemia and myelodysplastic syndromes, but considers the drug less critical to MEI’s story. Encouraging data could nonetheless drive upside, the analyst said. 

Price Action

MEI Pharma shares were trading up 5.41 percent to $3.70 at the time of publication Friday morning. 

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