Cancer is disease that has impacted the lives of each and everyone one of us. Yesterday Synta Pharmaceuticals (SNTA) reported findings from a study of one of their compounds in the fight against breast cancer, just two weeks after I called for a 40% upside in the stock based on promising data. That target has been met, and there is more upside likely ahead. In 2010 alone, cancer was the second leading cause of all mortality United States. Rates are rising as more people live to an old age and as mass lifestyle changes occur in the developing world. In 2010, 211,731 women were diagnosed with breast cancer, and 40,676 women died from the disease. 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 which prolongs and improves quality of life may be sitting on a proverbial gold mine. That said SNTA may indeed be sitting on such a drug which could generate billions in revenue and result in the stock moving magnitudes of order higher from current levels. Its leading candidate drug, which caught my attention, is the breast, colorectal, lung and hemolytic cancer drug ganetespib.
Great Results Reported Yesterday on SNTA's Leading Drug Candidate
There were excellent results presented today on SNTA's leading drug candidate, ganetespib. Before sharing the data, you should understand what the drug does before considering investing. Ganetespib, has now been studied in over 700 patients in more than 20 clinical trials. In preclinical models at the molecular level, ganetespib inhibits a molecular chaperone called Heat Shock Protein 90 (Hsp90), essential to the function of many of the most fundamental drivers of cancer cell growth and proliferation (see figure 1). 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. In this article I will discuss how promising I believe this drug to be as an epidemiologist, and why I believe the stock has major upside potential as an investor.
Figure 1. Image of Heat Shock Protein 90, A Molecular Chaperone, Which Is Inhibited in Cancer Cells by Ganetespib Preventing Cell Growth.
Figure 2. Image Depicting Heat Shock Protein 90 Being Inhibited And Cell Proliferation Ceasing.
Because Hsp90 is a molecular chaperone required for the proper maturation and activation of numerous client proteins it was studied as a target for drug activity. This target makes "biochemical sense" because many of these Hsp90 client proteins play critical roles in cancer cell growth, differentiation, and survival. Furthermore, relative to normal cells, cancer cells are more reliant on elevated levels of the active form of Hsp90 and, as such, appear to be selectively sensitive to Hsp90 inhibitors. What is unique about ganetespib relative to other major cancer drugs which only target a single biological pathway, inhibition of Hsp90 results in the simultaneous disruption of numerous signaling pathways that are critical for tumor cell proliferation and survival.
Yesterday's Data Release
SNTA announced yesterday that early results from the ENCHANT-1 clinical trial, which is a "window-of-opportunity" study designed to evaluate the clinical activity of single-agent ganetespib over a 12-week period preceding standard first line treatment. The ENCHANT-1 study which evaluates ganetespib monotherapy in patients with newly diagnosed locally advanced or metastatic HER2 positive or triple-negative breast cancer (TNBC), achieved the pre-specified criteria for advancing to the second stage of the trial. The data was overwhelmingly positive. Of the initial five HER2-positive patients enrolled in the study, two achieved "objective tumor response" and two achieved "stable disease" within the three cycles of treatment.. Of the initial ten TNBC patients enrolled and evaluable for response, two achieved objective tumor response and three achieved SD following treatment with ganetespib monotherapy.
What was so amazing about the numbers reported is that the protocol specifies advancing to the second stage of enrollment in each cohort if there was at least one objective tumor response out of the initial fifteen evaluable patients specified for Stage 1. This criterion was achieved in both cohorts, and therefore both cohorts will continue to enroll patients up to a total of 33 evaluable patients per cohort. Further substantiating the findings, metabolic response was also assessed in the study, by comparing baseline and week 3 PET scans. Of the five HER2-positive patients, four achieved metabolic responses. Of the 13 TNBC patients with post-baseline PET scans, six achieved metabolic response. Dr. Neil Spector, Co-Director of Developmental Therapeutics Program, Duke University and an investigator on the trial had this to say:
"Ganetespib appears to be what many of us in the Hsp90 field have been seeking for many years: a well tolerated, highly potent Hsp90 inhibitor that is clinically active in tough-to-treat cancers. Given the known role of Hsp90 in fueling breast cancer growth and metastasis, and the single-agent activity seen with ganetespib, I believe this compound has potential to be an important new therapy for women with breast cancer."
One of the largest successes was in a 68 year old woman diagnosed with inoperable TNBC, including extensive disease that had spread to her lymph nodes. The week 3 PET scan showed metabolic response in all lesions and the week 12 physical exam showed no evidence of tumor. Treatment was adjudicated a complete clinical response, and her disease was restaged from inoperable to operable. Earlier this month, she successfully completed a mastectomy with curative intent.
Dr. Tamas Hickish, Professor at the Royal Bournemouth Hospital, Dorset, UK, the treating physician and an investigator on the study had this to say:
"It is quite remarkable to see such a strong clinical response in this devastating disease, particularly with a single-agent regimen this well tolerated. This outcome strongly supports the further investigation of ganetespib either as a single-agent or in combination with standard of care treatments used in this setting."
Dr. Iman El-Hariry, Vice President of Clinical Research at SNTA added:
"These encouraging findings confirm prior signals of clinical activity seen with ganetespib in breast cancer. The favorable safety profile, clear single-agent clinical activity, and strong rationale for combination therapy suggest ganetespib may have broad potential utility in breast cancer. Taxanes in particular are widely used in breast cancer. The positive results for the combination of ganetespib with docetaxel in lung cancer provide strong rationale for exploring the taxane combination regimen in breast cancer as well."
The expansion of the ENCHANT-1 trial will also allow for evaluation of the combination of weekly paclitaxel and ganetespib. Separately, an investigator-sponsored study evaluating the combination of ganetespib, paclitaxel, and trastuzumab in HER2-positive patients is initiating at MSKCC and NYU.
Results from ENCHANT-1 are expected to be presented at a medical meeting later this year. Because of the promise of this and earlier data, insiders and analysts are bullish.
Insiders Are Buying And Analysts Are Bullish
Insiders have been actively buying up shares of this cancer-focused biotech drug developer. The bulk of the purchases, representing seven different insiders and more than 2 million shares, have come in the $4.50 to $5 range. A SNTA director, Bruce Kovner, bought 200,000 shares for a $799,160 stake in the company recently, but was small in comparison to his purchase of 2 million shares for $4.65 last month. Simply visiting a page dedicated to SEC filings for the company reveals that persons inside the company are buying shares on a weekly basis. Substantial purchases have been made by Bruce Kovner, Bill Reardon, Safi Bachall and Vojo Vukovic. Note these are direct purchases, not simply exercising of warrants/options. This is extremely bullish activity, as insiders recognize the activity of ganetespib and the potential the drug has. Further, the stock is still oversold, considering it was recently above $10.00.
Recent analyst comments suggest there is massive upside from the current price of $5.20. JMP's Mike King upgraded the shares to Outperform and set an $11 price target. In a recent market current on Seeking Alpha, it was noted Adam Feurstein does not agree with the potential of the data, although he is not a specialist in biostatistics, medicine or epidemiology. His comments should be considered, yet the data speaks for itself. Jefferies' Thomas Wei says "incremental geographic data from [a] recent analysis the GALAXY-1 trial [will] support the efficacy profile" of the drug. The analyst has a solid buy rating and a $22 price target on the stock, a premium of nearly 400% from the current $5.20 price. Of the 7 buy ratings and two hold ratings, the lowest price target is $6.00, a premium of 15% higher than the current $5.20 price, while the average price target is $11.75, or a premium of 125%.
Takeaway: There is a Ton of Upside Left.
The stock has bounced off the 52-week low of $3.76 to the mid $5.00 range last week. yesterday the stock popped 35% to $6.90. Over the next 12 months, earnings will be small catalysts to price changes as will data releases from other studies including the GALAXY-2 study. I see the stock approaching $8.50 before the next major data release. If more positive data is announced, this stock will easily be at $10.00, or nearly 50% upside from current levels.
Disclosure: I am long SNTA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.