Shares of Marinus Pharmaceuticals Inc (NASDAQ: MRNS), a micro-cap biotech focused on therapies for neuropsychiatric disorders, are likely to see upside amid some key near-term events, according to Jefferies.

The Analyst

Analyst Andrew Tsai initiated coverage of Marinus shares with a Buy rating and $10 price target.

The Thesis

Marinus' ganaxolone is being developed for neuropsychiatric disorders such as pediatric epilepsy, postpartum depression, or PPD, deadly seizures and potentially major depressive disorder, or MDD, Tsai said in a Tuesday note.

MDD is a $5 billion-plus market opportunity, the analyst said.

Tsai said he expects the stock to appreciate over the next six to 12 months due to the following four drivers:

• A fuller Phase 2 PPD dataset for oral and intravenous-to-oral ganaxolone is due in the first half of 2019. The analyst said he believes Marinus needs to show similar efficacy as the preliminary data in more patients, as well as report no events of fainting — a key differentiating factor over rival SAGE Therapeutics Inc (NASDAQ: SAGE)‘s brexanolone, which is two to three years ahead in development.

• New Phase 2 data in deadly seizures is due in the first half of 2019. If it's positive, Tsai projects $2 to $4 per share in upside on a 35-50-percent probability of success.

• The announcement of a new CEO.

• Marinus is likely to release a strategy for MDD in the second half of 2019 or the first half of 2020.

Tsai also explored the possibility of Marinus unlocking the value of ganaxolone with a partnership or M&A.

"MRNS is an inexpensive name that offers a favorable setup at current price levels," the analyst said.

"The risk/reward for MRNS ($200-million cap) is skewed heavily toward the upside, as the Street appears to underappreciate [the company] having multiple shots on goal."

The Price Action

Marinus shares were up 9.55 percent at $3.90 at the time of publication Tuesday.

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