Description

Now is the point to decide if you wish to read further because this is micro-cap, speculative, pre-revenue, and a non-compounder…  So…  On the flip side it’s under tax selling, spin dynamics, index selling, and from such a depressed price a lot can go right for them in 2024.

MURA is a recent spin-off of the clinical-stage oncology business unit from Alkermes (ALKS $4.6B mkt cap) and seems to have, just today, begun to get noticed.  It has had a short but ugly road so far since the spin.  Regular way trading commenced on Nov 16^th at $16.69 and initially touched $17, before collapsing into the $3s under waves of index selling, 0.1 for 1 spin-off dynamics, and tax selling.  It’s a $74m market cap with 16.7m shares out, and ~$16/share in cash.   EV is negative (-$200m).

Last month, before the spin, Morgan Stanley put out a note targeting a trading value range estimate of $32-$63/share ($500m-$1B), citing a 2026 projected launch of their lead pipeline candidate (Nemvaleukin Alfa, now in phase 3 trials) with initial data expected in 1Q25, and future potential WW sales of $1.3B.  The company is funded with $275m of cash, or ~$16/share, expected to get them through 4Q25, subject to enrollments, and was risk adjusted to a 50-60% probability of success. 

These factors contributed to the initial price collapse:

• The $275m of cash is hard to see. Outside of the Edgar filings, the company data has yet to flow into the normal investor information channels such as Bloomberg, Yahoo, etc.  These databases will catch up when they file the 10-K, presumably in March.  For now, it doesn’t screen well (nor accurately).  
  
• Parent ALKS is a much larger company and is a member of 172 Indices.  So, many Index recipients of the MURA spin had to sell because it didn’t fit their mandate.
  
• The low 0.1 for 1 share ratio of the spin, combined with the low share price, made the value to an ALKS investor worth only about 1.5% of their investment.  So, spinoff dynamics cause many to just sell, opting not to invest time or effort to learn about this new co.  And, for many MURA would be outside their mandate due to market cap size, lack of cash flow, embryonic stage of the business, illiquidity issues, or many other reasons.
  
• The mid-November spin happened at the onset of tax selling season, adding additional reasons to jettison.  Today (Fri Dec 22) the company had its first material bounce after hitting a low on Monday.  We’ll see how one more week of tax selling works out.

But from these pessimistic levels, a lot can go right.  In just a little time, we should see first catalysts as we get out of tax selling season, allow index rotational selling to subside, and get the filings out so accurate company data flows into the regular channels.  By Spring, stock screens will show the company’s ~$16 per share of cash, and it will be less than a year to key trial data.  Anticipation of that alone should have MURA trading above half the cash or $8/share.  

The lead candidate, Nemvaleukin, is in two potential FDA registration enabling studies.  A phase 3 for Platinum-Resistant Ovarian Cancer (PROC) taken in combination with Keytruda, and a Phase 2 for Mucosal Melanoma.  Both trials expect to have key data out well before the cash is spent in 1Q25. 

~$600m has been invested into Mural’s therapies to date and they are in an exciting frontier of oncology.  To give the medical minimum, which might sound incomprehensible to the VIC crowd (it did to me), the company research focuses on engineered Interleukin-2 (IL-2) Cytokines and their interaction at the IL-2 receptor to prevent degradation and enhance the therapeutic window by allowing increased potency while overcoming low tolerability. So, to date there is compelling data on efficacy showing durable window of treatment responses of over six months based on the previous phase 1-2 trials. 

There are also additional pipeline items in phase 1-2 trials with enrollments complete, but with approval horizons beyond the currently funded runway.  Candidates are expected to be named in 2024 for IL-18 and IL-12.

There have been some flameouts at other companies in the specialized area of IL-2 research, so investors have low current enthusiasm.  These include Bristol/Nektar (bempegaldesleukin) and Sanofi (SAR444245), but we really don’t know how this Cytokine angle will play out, despite encouraging early results. 

Other companies with IL-2 assets such as CUE, XLO, HOWL are in earlier stages at Phase 1-2, but trade with more optimism at positive EVs and market caps above or close to their cash.  So, it is conceivable that MURA trades $8-$12 per share (still discounts to its cash), once the data sets are complete.

And catalysts can jump out at us from a variety of places… Oncology cognoscenti making favorable mentions or presentation at key conferences, a white paper citing the promise of this type of IL-2 Cytokine research, or management engaging positively with investors, all could have a potentially material impact in 2024.  If so, we could see the valuation envisioned by Morgan Stanley.

Additionally, there are merger opportunities.  Teaming up with another clinical stage company to efficiently utilize the combined cash, manage overhead, and to diversify the binary risks among a larger number of trials/therapies makes sense.  This could also become part of the oncology division of a larger enterprise who can more easily handle the development costs.

From currently depressed levels with such a sizeable cash runway, and maybe even some luck, a lot can go right.

Catalyst

• Edgar filings to allow accurate info into the screening channels, revealing the cash to many (most?) investors.
  
• Tax and Index selling peters out.
  
• Awareness through sell side coverage.
  
• Oncology cognoscenti casting this type of research in a positive light.
  
• Additional candidate nominations for IL-18 and IL-12 in 2024.
  
• IL-2 PROC and Mucosal melanoma data expected 1Q25.