Prader-Willi Syndrome Treatment Could Double Your Money in a Tiny Speculative Biotech

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It’s not that unusual in the world of biotech and emerging medtech to run across companies that have previously never been heard of or covered. It is also not that uncommon to hear about unfamiliar diseases, ailments and other medical issues. That fits the case twice for Millendo Therapeutics Inc. (NASDAQ: MLND). This company is a new player in the public biotech space after completing a reverse merger in December of 2018. Millendo’s lead asset livoletide is in a registrational study for the treatment of Prader-Willi syndrome (PWS).

While this company is unknown by many investors, Laura Chico of Wedbush Securities believes that this could be even better than a double-your-money call. She started Millendo as Outperform and assigned a $24 price target. Be advised that the market cap here is just under $150 million, so it is highly speculative, even related to emerging biotech companies.

The price reference in the research report was $11.08, but the shares closed at $10.65 on Thursday, in a 52-week range of $6.77 to $17.34.

PWS affects only about 10,000 patients in the United States. This opportunity might still be large, according to Chico’s report, because there are no available treatments for the hallmark syndrome, hyperphagia.

ZEPHYR study data is set to arrive in the first half of 2020. Additional data will be coming for the company’s second asset, nevanimibe. The report calls out Millendo as approaching an important value-creating period. Still, its shares have been under pressure since June. One defensive issue here is that Millendo is said to have about $5.00 per share in cash as a downside buffer.

According to the biotech company’s own data, the ZEPHYR study will evaluate the safety and efficacy of livoletide on food-related behaviors in PWS patients. The primary endpoint is said to be an assessment of livoletide’s impact on hyperphagia, the excessive hunger that is a hallmark symptom of the disease. ZEPHYR also is said to be one of the largest global PWS studies ever conducted, and the company previously noted that its Phase 2b portion aims to recruit 150 patients from up to 40 clinical sites in the United States and Europe.

According to the Wedbush note, PWS is a complex genetic disorder characterized by various metabolic and cognitive disease manifestations. PWS infants are said to exhibit difficulty eating and experience failure to thrive. As the disease progresses, the syndrome is characterized by insatiable hunger, obesity, cognitive impairment and behavior issues. Also worth noting is that the mean survival is 29.5 years, per recent data. Human growth hormone is an approved treatment, but therapies address the hallmark trait of hyperphagia.

As far as the strategy and setup for investing in this speculative company, Wedbush’s report said:

Overall, ZEPHYR’s design parallels the Phase 2a study and should livoletide demonstrate a HQ-CT change consistent with the Phase 2a study results (~4-5 points), we see potential for an Fiscal Year 2022 launch. While other agents are also advancing in the PWS competitive landscape, we see livoletide’s once-daily dosing offering strong positioning. Ultimately, we assume therapies which offer the greatest improvements on hyperphagia will be adopted. Our current estimates incorporate livoletide US revenue reaching $281 million by Fiscal Year 2026. Current cash ($5/share) offers modest downside protection, while upside beyond our $24 target can be realized through incorporating ex-US markets and/or nevanimibe credit. Bottom line, with the stock trading at a ~$150 million valuation, we like the setup.

Millendo’s trading volume suggests that the stock is not that well known by investors. It was a mere 15,746 on Thursday, and its average day’s trading volume is barely 55,000 shares. In fact, it has seen 100,000 shares or more trade only during eight trading sessions in all of 2019. Even short sellers hardly know this company, as its short interest has been less than 100,000 shares in every reporting period so far in 2019.

There are well-known emerging biotech companies, and there are highly speculative emerging biotechs. This sounds like one of those calls that is an all-or-none opportunity.


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