What happened
Shares of clinical stage biopharma Marinus Pharmaceuticals (MRNS +0.00%) rose over 18% today after Baird initiated coverage with an outperform rating on the stock. It was more bullish than that, actually.
Analyst Brian Skorney set a $15 per share price target -- shares are trading hands at less than $6 per share after today's pop -- and claimed that the company's lead drug candidate is on par with the best in the industry except on one key metric: valuation.
Investors responded by bidding up the price of shares and handing the company a market cap over $235 million. As of 11:17 a.m. EDT, the stock had settled to an 11.1% gain.
Image source: Getty Images.
So what
Marinus Pharmaceuticals has lead investors on a roller coaster path in the last 12 months. This time last year the company was in the "penny stock" bucket with a market cap of $20 million. Before the end of 2017, however, shares exploded to nearly $10 apiece on enthusiasm for the company's early stage pipeline. That pushed the market cap over $320 million. The stock has slid in early 2018, but is back on the upswing lately. That should continue after today. Why?
Baird thinks the pipeline is still significantly undervalued. The main point made by Skorney in his analyst note is that Marinus Pharmaceuticals' lead drug candidate, ganaxolone, is not fairly valued when compared to its primary competitor, SAGE-217. Both are being investigated as potential treatments for various forms of depression and, if approved, would represent the first new class of anti-depression drugs in nearly 20 years.
The sticking point for Skorney is that high hopes for SAGE-217 have nearly doubled Sage Therapeutics' market cap to $7.1 billion. While it has more irons in the fire than its tiny rival, the analyst thinks Marinus Pharmaceuticals is worth around $600 million on ganaxolone's blockbuster potential alone.
Now what
Ganaxolone has a lot of promise, but a recent delay in its ongoing phase 2 trial will put it pretty far behind SAGE-217 should both drugs gain marketing approval. It wouldn't be an impossible hurdle to overcome, but the delay puts even more pressure on the drug candidate to deliver efficacy and safety on par or better to its more mature competitor. Simply put, Marinus Pharmaceuticals could very well be undervalued, although investors may want to consider the downside of having an inexperienced management team, especially with a more competent peer racing toward the market.
