MIRA Pharmaceuticals reported financial results for the third quarter ended September 30, 2024. As is typical for a preclinical-stage company, revenue was $0, on par with our estimates. GAAP EPS of $(0.14) was a slight miss on our $(0.13)estimate, mainly due to higher-than-forecast general and administrative expenses. Common shares outstanding increased from 14.78 million at the end of Q2 2024 to 16.27 million on September 30, 2024, representing a dilution of 10.05%.

MIRA’s cash position improved from $2.82 million at the end of Q2 2024 to $4.14 million on September 30, 2024, causing the company’s current ratio to rise from 3.7x to 6.1x. With current cash on hand, management expects to be able to fund operations through Q4 2025; however, as MIRA advances its Ketamir-2 asset into human clinical trials in early 2025, the need to raise significant additional external capital in the near term remains pressing.

The company maintains an effective shelf registration statement, filed with the SEC on August 12, 2024 and amended on September 24, 2024, for the issuance of common stock under various types of equity offerings. The shelf registration statement includes an At The Market (ATM) Offering Agreement with Rodman & Renshaw LLC, under which MIRA may sell shares of its common stock up to an aggregate amount of $75 million. As of September 30, 2024, MIRA had sold 1,485,263 shares of common stock at an average price per share of $1.61, receiving net proceeds of $3.1 million after commissions and fees. Between October 1 and November 12, 2024, MIRA sold 294,704 shares of common stock under the ATM Agreement at an average price per share of $1.84, for net proceeds of $0.5 million.

While the ATM Agreement is a convenient way for the company to meet its liquidity needs, it will lead to ongoing dilution of existing shareholders. MIRA remains on track to submit an Investigational New Drug application for neuropathic pain indications in December 2024 and begin Phase I clinical trials in humans during the first quarter of 2025.

We reiterate our BUY rating and 13-month price target of $7.50.

MIRA Pharmaceuticals’s stock experienced significant price and volume increases following the company’s announcement that its Ketamir-2 product candidate induced near-complete normalization of pain sensitivity in a mouse model of chemotherapy-induced neuropathy, under experimental conditions where gabapentin provided only moderate relief. Neuropathic pain was induced in mice through administration of four doses of paclitaxel, a common chemotherapy drug. Pain sensitivity was measured using the Von Frey filament test, a mechanical sensitivity test that measures an animal's experience of pain in response to stimuli. To perform the test, animals are placed on a wire mesh surface and calibrated filaments of varying stiffness are applied through the underside of the mesh to the animal’s hind paw, to determine the minimum amount of force required to make the animal withdraw its paw. The force exerted by the filament is inversely proportional to its length and directly proportional to its width. MIRA’s results build on earlier successes across various pain models, further validating Ketamir-2's potential as an effective pain management drug with fewer side effects than gabapentin and pregabalin. Besides chemotherapy-induced pain, MIRA is planning to advance Ketamir-2 for the treatment of diabetic neuropathy.

Neuropathic pain is a expanding health indication, with increasing prevalence linked to conditions like diabetes, chemotherapy-induced nerve damage, and post-herpetic neuralgia. Chronic pain markets are large and growing, with gabapentin (Neurontin) expected to reach $4.95 billion in sales by 2033 and pregabalin (Lyrica) expected to reach $2.20 billion in sales by 2032.

MIRA is on track to submit an Investigational New Drug application for neuropathic pain indications in December 2024 and begin Phase I clinical trials in humans during the first quarter of 2025. MIRA has completed the design of its Phase I clinical trial, which will assess safety, tolerability, and pharmacokinetics in humans. The company’s primary goal is to demonstrate efficacy in humans as early as possible in subsequent Phase II studies.

Looking ahead, MIRA aims to broaden Ketamir-2’s therapeutic applications to include major depressive disorder with suicidal ideation, treatment-resistant depression, and post-traumatic stress disorder, potentially leading to additional IND filings in 2025.

We reiterate our BUY rating and 14-month price target of $7.50.

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.