Synta's Slump On Shelf Registration Provides Entry Point Ahead Of ASCO

By Dee Kotak

In February, we reported on the strengths of Synta Pharmaceuticals' (SNTA) subgroup approach to its non-squamous cell lung cancer (NSCLC) program. Synta's share price pulled back from a high of $11.71 in January to $8.46, to recover to $9.80 before now pulling back almost to the 200 SMA ($8.13) after its Q4 earnings call on March 14. The cause of the slump was the registration of a $300M mixed security shelf in tandem with the release of Q4 earnings. As of Dec. 31, 2012, SNTA had $100M in cash, which is sufficient to fund operations into Q1 2014.

SNTA raised a total of $112M in cash last year, so the shelf registration was clearly an unwelcome surprise to many investors, although Synta had a cash burn rate of $60M for 2012. With a number of studies ongoing and the confirmatory GALAXY II study now under way, necessity was always going to require a shelf registration this year. The investment thesis is unchanged, and SNTA is positioned to take full advantage of an increased valuation should the May interim data release from GALAXY-1 show statistical significance.

The SNTA Q4 earnings conference call was limited in content, lacking any major novel revelations. SNTA goes into a silent period ahead of the second interim analysis from GALAXY I, with presentation of results planned for ASCO at the beginning of June (subject to acceptance). What was made clear on its Q4 earnings call is that management believes that Ganetespib as part of combination therapy is the preferred developmental pathway. Thus, the monotherapy trials of Ganetespib in ALK+ lung cancer and breast cancer, the CHIARA and ENCHANT trials, respectively, will be reviewed later in the year with an indication as to further development plans. As on previous conference calls, SNTA management demonstrated complete command of the science and their plan to execute.

The pre-specified overall survival analysis for six months from the last patient enrolled is expected in May. At that time, the 252 patients will have a median follow up of nine to 10 months, which will be a fairly mature survival data set. At the time of the first interim results, 80 patients had been enrolled in the study for at least six months, sufficient to generate some very encouraging data. The second interim will have three times the number of patients that have mature data, making statistical significance a real possibility. These results offer a statistical window on what to expect as an outcome from GALAXY II, so they should potentially be viewed as if these were the Phase III GALAXY II results.

Subgroup Analysis at the First Interim Provided Very Encouraging Data

In GALAXY-1 N=240, stage IIIb/IV adenocarcinoma randomised for second-line therapy 1:1 to docetaxel (standard of care) or docetaxel and Ganetespib. A number of subgroups were identified for analysis, as the trial has an operationally adaptive design that means the results of the subgroup analyses will be used to focus Phase III enrollment. Patients were classified into subgroups on the basis of pre-specified clinical and biomarker characteristics.

Galaxy-1 Interim Results

Interim results on 172 patients were reported last year in September at the European Society of Medical Oncology (ESMO). The median overall survival for docetaxel in second line NSCLC is normally 7-8 months:

The objective response rate and progression free survival were improved from 8% to 16% and from 2.8 months to 4.2 months. Although these effects might appear small, they are clinically meaningful in this difficult-to-treat population. As a consequence of trial recruitment, many patients within the interim set had been followed for less than six months. If the patients that had been enrolled for six months or more are analyzed, the data approaches statistical significance with N=77:

There is a very good chance that statistical significance will be achieved at the second analysis. There are certain patients that will rapidly progress, whatever treatment they have, and so if the rapid progressors are eliminated, the patients >six months after diagnosis of advanced disease (65% of the GALAXY-1 population) have encouraging statistics with a sizeble number, N=108:

The above data indicate that patients in this group were living 1.7 times longer than the control population. The Kaplan-Meier curves clearly diverged, indicating an OS benefit signal despite the fact that the median OS was not reached in the treatment arm. Patients were allowed other therapies, but any imbalance between the groups is very unlikely to be material given that the drugs used work in 1% or less patients. The GALAXY-1 study is 90% powered to detect a PFS improvement from six to 12 weeks in patients with elevated LDH, and from five to 10 weeks in patients with mutant KRAS. For all adenocarcinoma patients, GALAXY-1 is 88% powered to detect an improvement in PFS from three to 4.5 months, and 73% powered to detect an improvement in overall survival from six to 8.5 months. (All powering assumptions based on a one-sided alpha of 0.05.)

GALAXY I informed the trial design for GALAXY II. In essence, GALAXY I (N=252) is a smaller GALAXY II (N=500), hence if it reaches statistical significance on the upcoming analysis, or on the final analysis, then SNTA will be assured of a virtually certain home run for GALAXY II in 2014. The current weakness is an opportunity to be positioned for the run-up into ASCO and potentially landmark data.

Disclosure: I am long SNTA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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