Here’s Why Synta Is a Good Play in the Cancer Meds Market

Source: http://www.flickr.com/photos/23506671@N07/

Source: http://www.flickr.com/photos/23506671@N07/

While there is not a cure for cancer at this time, many pharmaceutical companies are working diligently toward this goal. Much of the research centers on blocking the growth of cancer cells while trying to preserve healthy cells. Historically, chemotherapy and radiation have been utilized to shrink and kill cancer cells, but this destroys normal tissue leading to severe side effects and reduced quality of life during treatment. One of the goals of cancer treatments, beyond curing it entirely, is to — at minimum — slow the progression of disease and prolong life. Given the reach of cancer in all of our lives and the annual incidence of the disease, a company that can develop a successful treatment that prolongs and improves quality of life may be sitting on a proverbial gold mine.

That said, Synta Pharmaceuticals (NASDAQ:SNTA) may indeed be sitting on such a drug that could generate billions in revenue and result in the stock moving magnitudes higher than current levels. The purpose of this article is to compare the status of Synta’s leading anti-cancer drug candidate, ganetespib, to other competitors’ drugs of similar class, and discuss the trials and tribulations of the company in 2013 and where it’s headed for 2014. I also discuss the science of the drug and why it is one of the most promising therapies under study to date.

Ganetespib belongs to a new class of drugs known as heat shock protein 90 (Hsp 90) inhibitors. Hsp90 plays a role in the maturation of client proteins, which help cells growth, divide, and survive. Compared to healthy cells, cancer cells are more dependent on elevated levels of Hsp90 to proliferate. As such, inhibiting the production of Hsp90 could stop certain types of cancer. Unlike other targeted therapies which seek out specific mutations, such as Roches’ (MKTS:RHHBY.PK) Herceptin or Pfizer’s (NYSE:PFE) Xalkori, which are specifically tailored to seek out and attack specific mutated cells (with mixed success), Hsp90 inhibitors are believed to be able to disrupt several signaling pathways simultaneously to stop tumor cell proliferation.

Treatment with ganetespib has been shown in preclinical models to reduce some aggressive features of tumors, such as the ability to induce the growth of new blood vessels, the ability to spread to other organs in the body, and to resist attack by traditional therapies, such as chemo. Synta is primarily focusing on developing ganetespib as a treatment for non-small-cell lung cancer (or, NSCLC) breast cancer and colorectal cancer. If approved, the drug is expected to hit annual peak sales of $425 million to $600 million.

While its anticancer properties are not in question, successful formulation of a drug that can actively treat cancer in patients is indeed in question. Table 1 shows the status of competitors’ HsP 90 trials.

Table 1. Status of All Known Heat Shock Protein 90 Inhibitor Trials

Pharmaceutical Company Anti-Cancer Therapy Last Known Therapy Status
Astex Pharmaceuticals AT13387 Phase 2
Biogen BIIB021, BIIB028 Suspended
Debiopharm/Curis Debio 0932 Phase 1/2
Esanex SNX-5422 Restarted
Exelixis XL888 Suspended
Infinity Pharmaceuticals Retaspimycin HCI Terminated after failed trial studying NSCLC. No
Myrexis MPC-3100, MPC-0767 Suspended
Novartis/Vernalis AUY922 Phase 2
Samus Therapeutics PU-H71 Phase 1
Synta Pharmaceuticals Ganetespib Phase 2/2b/3

As we can see, in addition to Synta, only Astex and Novatus’ therapies are also in the phase two trials. Infinity had a promising HsP90 inhibitor in retaspimycin HCL, but its trial failed after an NSCLC study found no significant difference between the trial therapy and the standard therapy and thus did not meet significance requirements that would justify continuing with the trials.

In September 2013, Retaspimycin HCI was terminated, casting doubts on the future of Hsp90 inhibitors as a viable treatment for NSCLC. Retaspimycin was intended to treat squamous cell carcinoma, a type of NSCLC commonly caused by smoking. This hurt Synta’s stock as well. Considering the rate of suspensions and failures we see that Synta is in dangerous territory with HsP90, and it has everything riding on ganetespib, but has also had the most progress.

I am extremely thrilled with the HsP 90 inhibitor approach to cancer treatment. It has proved difficult to move from the biochemistry to the in vivo therapy. If you are looking for the one company with a real shot to get FDA approval for an HsP90 inhibitor, then Synta is the best bet. The stock is not without risks (later trials could be failures, data quality could diminish, eventual approval for the drug down the road could be denied, company could run out of cash etc.), but shares are a strong buy in my opinion, especially if you can get them around $5.00.

Two Major Trial Results Reported in 2013

ENCHANT-1 Data Reports

In this trial, investigators are evaluating the efficacy and safety of ganetespib monotherapy for treatment of HER2+ or triple-negative breast cancer patients previously untreated for locally advanced or metastatic disease. In the overall trial, they are seeking to enroll 35 patients in each cohort and to then perform an interim analysis once 15 patients are enrolled. Earlier this year, five patients were enrolled into the HER2+ cohort and 15 patients were enrolled into the triple-negative breast cancer cohort and an interim report was given. Of these, four patients in the HER2+ cohort and 11 patients in the triple-negative cohort were evaluated by an independent panel. Of the four patients in the HER2+ group evaluated, three patients (75 percent) achieved an objective response, including one complete radiological response and two partial responses. One patient (25 percent) in this cohort achieved stable disease.

How about the triple-negative breast cancer cohort? Of the 11 patients in the triple-negative breast cancer cohort that could be evaluated, two patients achieved partial response (18 percent) and five patients achieved stable disease (45 percent), for a total disease control rate of 64 percent. At the week 3 PET assessment for metabolic response, three of the four patients (75 percent) able to be evaluated by independent review in the HER2+ cohort achieved a metabolic response.

GALAXY-1

Over the past year, investor sentiment has worsened due to several factors. In June, Synta reported that during the GALAXY-1 study, patients given ganetespib showed a median survival rate of 9.8 months, compared to 7.4 months for the group only given chemotherapy. However, the drug only reduced the risk of death by 18 percent, far lower than the company’s original projection of 31 percent in October 2012. The Hazard Ratio reported in the study of 0.68 means that the combination drug group was 32 percent as likely to survive compared to the standard care group. The Street was expecting about 34 percent difference. This number was a bit lower than initially reported in earlier updates in October 2012, but promising.

Overall survival analysis suggested ganetespib led to 30 percent longer life. A sub-analysis examining those patients who were diagnosed more than 6 months prior to study entry (which would be the most sick patients), and the combination group had a statistically significant (p=0.01) hazard ratio of 0.36, or a 64 percent difference in survival compared to the standard care only group. Finally, the ganetespib group versus a standard care group had a statistically significant (p=0.0053) reduction in risk of 50 percent (hazard ratio=0.5) for the formation of lesions. This is highly important. Lesions are what actually lead to folks succumbing to cancer and ultimately passing away. By preventing lesion formation, life is extended allowing patients to have a chance to fight the cancer and possibly survive.

A Recent Share Offering Has Pressured Shares

An additional offering of 16.1 million shares in November, aimed at boosting the company’s light cash position of $53.4 million, has caused the stock to drop by over 20 percent since late October. However, the offering was successful for the company’s coffers as it reported proceeds of over $60 million from the sale, prior to the deduction of underwriting discounts, commissions, and other expenses. Shortly after this offering we learned that insiders were huge buyers on the open market after shares tanked. In fact, insiders purchased over five million shares in the month of November.

Analyst Price Targets

The analyst coverage on this stock should catch your attention immediately. The six analysts that cover the stock are extremely bullish. In fact, the midpoint of the price targets for all six analysts is over $16.00 a share. My 2014 price target is $12.00.

Conclusion

Synta is a great play. New trials are set to begin. The data has been positive. It has a lot of other positives going for it including very bullish analysts. They do spend a lot of cash on these projects so a future offering is not out of the question. However, each new piece of positive news will send shares markedly higher. Synta is a top pick in 2014 for a doubling in share price in my opinion.

Disclosure: Christopher F. Davis is long Synta Pharmaceuticals.

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