MIRA Pharmaceuticals reported financial results for the second quarter ended June 30, 2024. As is typical for a preclinical-stage company, revenue was $0, on par with our estimates. GAAP EPS of $(0.11) missed our earnings expectations of $(0.08), mainly due to higher-than-forecast general and administrative expenses. Common shares outstanding remained unchanged at 14,780,885.

MIRA’s cash position decreased from $4.6 million on December 31, 2023 to $2.9 million on June 30, 2024, causing the company’s current ratio to deteriorate from 8.7x to 3.7x. We note that while current cash is expected to support operations through year-end 2024, MIRA expects to generate losses for the foreseeable future and will need to secure significant external funding in the near-term to continue the development of its two preclinical assets.

We update our FY 2024 earnings estimate to $(0.52) to account for higher than previously modeled G&A costs. We also lower our year-end 2025 price target to $7.50, in light of the pressure MIRA is experiencing to secure additional funding by year-end, the associated likely dilution of existing shareholders, and the uncertainty around MIRA’s ability to continue as a going concern.

We further note that MIRA’s CEO, Erez Aminov, was named Chairman of the Board and CEO of Telomir Pharmaceuticals, following the passing of Telomir’s previous CEO, Christopher Chapman, Jr., MD. Telomir Pharmaceuticals is a preclinical-stage pharmaceutical company focused on the development and commercialization of Telomir-1 for the treatment of age-related conditions. Having Mr. Aminov dividing his time and attention between two preclinical-stage companies further increases the risk profiles of both.

Notwithstanding MIRA’s financial pressures, we remain optimistic about the prospects of the company’s preclinical assets.

MIRA recently revealed that Nor-Ketamir-2, the principal metabolite of its lead asset, Ketamir-2, demonstrated superior selectivity and bioavailability, as well as extended therapeutic efficacy.

A new formulation brings Nor-Ketamir-2’s bioavailability close to 100%, a significant improvement over traditional ketamine’s bioavailability of less than 30%. Taken together with Ketamir-2’s ability to passthrough the blood-brain barrier, this may allow for higher efficacy at lower doses or dosing frequencies.

The extended half-life and elevated levels of Nor-Ketamir-2 imply prolonged therapeutic effects, and the higher receptor binding site specificity of Ketamir-2 and Nor-Ketamir-2 suggest a reduced risk of adverse effects such as dissociation and hallucinations, enhancing the drug’s safety profile.

If validated in clinical trials, Ketamir-2 has the potential to offer effective treatment for neurological and neuropsychiatric disorders such as depression, treatment-resistant depression, and post-traumatic stress disorder, with a more convenient oral administration route than current marketed therapies.

In pursuit of its goal to file an Investigational New Drug (IND) application by year-end, MIRA has begun IND-enabling regulatory safety studies and is progressing with Good Manufacturing Practice (GMP)-compliant drug scale-up, devising a manufacturing process that allows large-scale, low-variability synthesis. The company is also completing Chemistry, Manufacturing, and Controls (CMC)documentation for Ketamir-2.

We will revisit and potentially revise our financial forecast during the fourth quarter of 2024, once additional information is available regarding the size and scale of MIRA’s upcoming financing round.

Shares of MIRA Pharmaceuticals nearly tripled in value since July 19 on news about the continued preclinical success of its investigational drug candidate, Ketamir-2. The newly released data from in vitro studies elucidates a potential mechanism underlying Ketamir-2’s superior oral absorption and ability to penetrate the blood-brain barrier more effectively than traditional ketamine. Improved penetration into target tissues would allow for lower doses of Ketamir-2 to achieve therapeutic effects.
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MIRA Pharmaceuticals has advanced its two preclinical assets, Ketamir-2 and MIRA-55, through preclinical testing, generating encouraging results. We summarize recent company news below.

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We re-initiate coverage on MIRA Pharmaceuticals with a Buy rating and a DCF-based 21-month price target of $10.00. MIRA isa preclinical development-stage life sciences company with two neuroscience programs, MIRA-55 and Ketamir-2, targeting a broad range of neurologic diseases and neuropsychiatric disorders.

Our rating is based on our view that the innovative potential of MIRA-55 and Ketamir-2 and their promising mechanisms of action warrant a higher valuation than the market is currently assigning to the company’s shares. However, MIRA represents a high-risk investment as the company has numerous hurdles to clear before bringing its product candidates to market. Many of the numerous hurdles MIRA will face along the product development timeline are binary events, and each could reduce the value of an asset to zero or, at a minimum, represent a significant setback. Further, MIRA competes in crowded target markets and may therefore face impediments to developing market traction against better-established competitors even after successful clinical development.

We expect MIRA to realize a sizable cash inflow from the sale of the Ketamir-2 and MIRA-55 assets in 2026 and begin generating product revenue in 2027.

That Ketamir-2 is not considered a controlled substance according to United States Drug Enforcement Administration (DEA) schedules, helps MIRA Pharmaceuticals avoid certain legal and regulatory requirements, elevated production costs, and manufacturing/transportation restrictions. A DEA classification of MIRA-55 is currently pending. If successfully developed, price and insurance coverage will be key considerations for patients and providers, influencing market penetration. Proper marketing strategy and sales tactics will be crucial in raising awareness about the drugs’ new mechanisms of action and to inform prescribers of potential use cases.

Our main concerns focus on the current entrenchment of low-cost generics across the target indications, a market condition expected to be more pronounced in three to five years when MIRA Pharmaceuticals expects its product candidates to be market ready. In addition, there are branded prescription drug candidates being developed by competitors with deeper pockets than MIRA Pharmaceuticals, which have a probability of coming to market before MIRA’s products, thus gaining a first-mover advantage in areas of unmet need. Finally, when compared to larger firms with established brands and sales channels, it is difficult for companies of MIRA’s size to conduct effective product awareness campaigns.

We expect MIRA’s stock to exhibit volatility that is typical of early-stage, biotech microcap companies. With the stock currently hovering in the one-dollar vicinity, a prolonged slump in the stock price carries the risk of delisting from the Nasdaq, which could result in further devaluation. On the upside, once proof-of-concept for its technologies has been established, MIRA could become an attractive acquisition target for larger competitors in the field.