Marina Biotech (MRNA)

Downgrading to Avoid/Sell Due to Program Delays
Recent Financings Continue to Weigh Heavily on Stock
Expected Reverse-Split Could Add to Pressure

Download Full 30-Page Report with Important Disclosures: MRNA Downgrade 12-08-11

1.) Development for FAP and Bladder Cancer Slower Than Anticipated: On June 9, 2011 Marina announced the dosing completion of the first 3-patient cohort in its START-FAP (“Safety and Tolerability of An RNAi Therapeutic in Familial Adenomatous Polyposis”) Phase I trial for CEQ508. The second cohort, which will receive 10x the initial dose, was expected to commence dosing in Q3 2011. Marina now expects doing for the second cohort to start in early-2012. Additionally, on November 29, 2011 Marina announced that their joint R&D team with Debiopharm had advanced a lead DiLA2 formulation and multiple UsiRNA candidates for their bladder cancer program. While this is a positive development for the program, Marina stated that the R&D team expects to select the lead candidate in early-2012, which is significantly later than anticipated. These delays in the development timelines have resulted in reductions to our financial model.

2.) Financings Continue to Weigh on Stock: Marina Biotech’s financing in May brought much needed cash to the company but at the cost of very heavy dilution. In addition to the issuance of the 22.3M shares in the base unit and the 22.3M shares available through the Series B unit warrants, there could be up to an additional 44.6M shares that could potentially be issued from Series A warrants after 1 year at $0.39. As of June 30, 2011, 7,121,500 of the Series B Warrants had been exercised, and in July 2011, an additional 15,172,000 of the Series B Warrants were exercised prior to their July 12, 2011 expiration date.This resulted in 22,293,500 addition shares of dilution and 22,293,500 of additional Series A warrants exercisable at $0.39 after one year. In addition, Marina announced on October 17, 2011 that they had entered into a purchase agreement with an institutional investor, whereby the investor committed to invest at Marina’s option, for up to 30 months, up to $15 million of equity capital. Again, this brings much needed capital to Marina, but adds to the dilution from the previous financing.

3.) Reverse-Split Nearly Certain: On November 30, 2011 Marina announced that NASDAQ had granted the company until January 31, 2012 to establish a closing bid price of its common stock of $1.00 or more per share for a minimum of 10 consecutive business days. Given the stock’s recent performance, future dilution concerns from both the warrant overhang and the equity purchase agreement and lack of catalysts until “early 2012”, we believe it is highly unlikely that Marina will regain the minimum bid requirement without executing a reverse-split, which could put additional pressure on the shares.

4.) Downgrading to Avoid/Sell with $0.10 Price Target: While we continue to believe in Marina’s RNAi science and pipeline opportunities, delays in development timelines combined with additional dilution from recent financings and the risks of a reverse-split has negatively impacted our financial models. Therefore, we are downgrading our recommendation to Avoid/Sell (from Neutral) and reducing our target to $0.10 (from $0.30) based on a 35x multiple on projected 2015 earnings adjusted for the additional shares with a risk discount of 55%.

Download Full 30-Page Report with Important Disclosures: MRNA Downgrade 12-08-11

CEQ508 FAP Trial 1st Cohort Complete – Now Dosing 2nd
Pre-clinical Studies Continue to Show RNAi Promise
May Financing Still Weighs on Stock – Maintaining Neutral

Download Full 30-Page Update with Important Disclosures: MRNA Update 08-26-11

1.) CEQ508 for FAP: On June 9, 2011 Marina announced the dosing completion of the first 3 patient cohort in its START-FAP (Safety and Tolerability of An RNAi Therapeutic in Familial Adenomatous Polyposis) Phase I trial with CEQ508. The first cohort received the starting dose of 1×10⁸ colony forming units (cfu)/day for up to 28 days of continuous oral dosing. The next cohort will receive 10 times the initial dose (1×10⁹ cfu/day) and started dosing in July. The trial is still on track to complete the dose escalation phase by the end of the year. (see CEQ508 for Familial Adenomatous Polyposis (FAP)

2.) Additional Promising Pre-clinical Data: Marina continues to demonstrate the promise of their platform technologies in a pre-clinical setting. Data presented at the TIDES Oligonucleotide and Peptide Research, Technology and Product Development Conference in Boston, MA and the 2nd RNAi Research & Therapeutics Conference in San Francisco, CA displayed the potential wide breadth of the company’s platform technologies. Marina’s Conformationally Restricted Nucleotide (CRN) platform demonstrated 60% greater inhibition of microRNA-21 (miR-21) when compared to an all-DNA construct. Delivery of a microRNA Mimetic in Marina’s SMARTICLES formulation provided greater than 80% inhibition of tumor growth in a liver cancer model. Additionally Marina demonstrated a 60-Fold increase potency of a target using a CRN-Substituted microRNA antagonist. These studies displayed the potential use of Marina’s platform as a mimetic to replace an under-expressed miRNA or as an antagonist to inhibit the activity of an over-expressed miRNA.

3.) May Financing Continues to Weigh on Stock: Although Marina’s May financing brought much needed cash to the company, the terms resulted in significant dilution that adversely impacts projected earnings per share in our financial model beyond our projected dilution for future capital requirements. In addition to the issuance of the 22.3M shares in the base unit and the 22.3M shares available through the Series B unit warrants, there could be up to an additional 44.6M shares that could potentially be issued from Series A warrants after 1 year at $0.39. As of June 30, 2011, 7,121,500 of the Series B Warrants had been exercised, and in July 2011, an additional 15,172,000 of the Series B Warrants were exercised prior to their July 12, 2011 expiration date. This resulted in 22,293,500 addition shares of dilution and 22,293,500 of additional Series A warrants exercisable at $0.39 after one year. Marina gained gross proceeds of $3.1M for the exercise of the Series B warrants. During the July 14th shareholder meeting shareholders approved a proposal to change Marina’s capital structure by increasing the number of authorized shares of common stock from 90,000,000 to 180,000,000 and thus removed the risk of the $2.5M cash penalty if the company had not been able to gain the approval.

4.) Reverse-Split Likely: With the overhang of the newly issued shares (and potentially future issued shares) we believe it unlikely that Marina will regain the minimum bid requirements putting the company at risk for de-listing or a reverse-split which could put additional pressure on their shares.

5.) Maintaining Neutral Rating: While we continue to believe in Marina’s RNAi science and pipeline opportunities, we are maintaining our Neutral rating with a $0.30 target based on a 35x multiple on projected 2015 earnings adjusted for the additional shares with a risk discount of 55%.

Download Full 30-Page Update with Important Disclosures: MRNA Update 08-26-11

Downgrading Marina Biotech to Neutral
Proposed Offering Adversely Impacts Financial Model
CEQ508 FAP Trial 1st Cohort Dosing to Complete in June
Interim Data Expected with Trial Completion by Year-End

Download Full Report with Important Disclosures: MRNA Downgrade 05-18-11

1.) Dilution: Although Marina’s announced financing is expected to yield much needed cash to the company (closing on or about May 20th), the terms result in significant dilution that adversely impacts projected earnings per share in our financial model beyond our projected dilution for future capital requirements.

2.) Overhang: In addition to the issuance of the 22.3M shares in the base unit and the 22.3M shares available through the Series B unit warrants, there could be up to an additional 44.6M shares that could potentially be issued from Series A warrants after 1 year at $0.39. In addition, Marina will require shareholder approval to increase the number of authorized shares to fulfill this obligation with a cash penalty of $2.5M payable to the investors in 1 year if the authorized share count is not approved by shareholders (meeting August 15th). (see Recent Financing Activity for details)

3.) Reverse-Split Likely: With the overhang of the newly issued shares (and potentially future issued shares) we believe it unlikely that Marina will regain the minimum bid requirements putting the company at risk for de-listing or a reverse-split which could put additional pressure on their shares.

4.) Reducing Rating to Neutral: While we continue to believe in Marina’s RNAi science and pipeline opportunities, we are reducing our rating to Neutral with a $0.30 target based on a 35x multiple on projected 2015 earnings adjusted for the additional shares and increased risk discount to from 50% to 55% and excluding the 25% acquisition premium due to uncertainty.

Download Full Report with Important Disclosures: MRNA Downgrade 05-18-11

Below is an archive of previous Marina Biotech (MRNA) Reports with Important Disclosures:

MRNA Update 03-30-11

MRNA Initiation 01-28-11