Synta Pharmaceuticals (NASDAQ:SNTA), one of my top picks for 2014 in the biotech sector, just announced a presentation of results from the ENCHANT-1 trial, a single-arm multi-center Phase II proof-of-concept study designed to evaluate its drug ganetespib for the treatment of metastatic breast cancer. Shares have bounced up and down all session as investors digest the news. The results were very favorable and strengthens my long-term buy recommendation on the stock. In this article I will provide context for the importance of this announcement by discussing the burden of cancer, the drug design process, how SNTA's leading drug candidate works (which is different than many traditional therapies), present the latest bullish data and provide two more reasons beyond this new data why you should consider buying at current levels.
In 2010 alone, cancer was the second leading cause of all mortality in the United States. Rates are rising as more people live to an old age and as lifestyle changes occur in the developing world (more industrialized, more sedentary routines, poorer diets etc). 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. Synta is developing drugs to extend and enhance the lives of patients with severe medical conditions, including cancer and chronic inflammatory diseases. SNTA is working on several drug candidates that have been discovered and developed internally in SNTA's labs and has HUGE potential for investors.
SNTA possesses a unique chemical compound library, consisting of proprietary compounds collected over two decades from industrial and academic sources that are not typically found at pharmaceutical firms, even larger more well-known pharmaceutical behemoths. Using this library of compounds, researchers use a variety of biochemical and molecular techniques to generate and optimize promising lead compounds and generate new drug candidates that can enter the drug development process. Most compounds do not make it past the preliminary stages, but some of the most successful drugs will, eventually leading to human trials and full blown randomized clinical trials. As an epidemiologist, I am very familiar with this process. SNTA currently has an impressive 800 issued patents and pending applications worldwide. SNTA's leading candidate drug is the anti-breast, colorectal, lung and hemolytic cancer drug ganetespib, which has real potential to come to market. It has been studied in over 900 patients in over 20 clinical trials.
How The Drug Works
How does it work? 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 figures 1 and 2). 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 therefore 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 is that inhibition of Hsp90 results in the simultaneous disruption of numerous signaling pathways that are critical for tumor cell proliferation and survival. 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 chemotherapy.
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.
The Latest Good News-Very Bullish
I provided the context on SNTA and ganetespib so you could understand the importance of these just announced results from the ENCHANT-1 trial. The results are being presented during a poster session at the 2013 San Antonio Breast Cancer Symposium in San Antonio, Texas. 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. The poster is shown below in figure 3.
Figure 3. Synta Pharmaceutical's Poster Presentation of Interim ENCHANT-1 Trial Results, San Antonio Breast Cancer Symposium, December 2013.
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%) achieved an objective response, including one complete radiological response and two partial responses. One patient (25%) 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%) and five patients achieved stable disease (45%), for a total disease control rate of 64%. At the week 3 PET assessment for metabolic response, three of the four patients (75%) able to be evaluated by independent review in the HER2+ cohort achieved a metabolic response.
Given the preliminary results demonstrating the activity of ganetespib, a new treatment option for the future is potentially brewing for patients with advanced breast cancer. As a shareholder, these findings are very promising. The company is seeking to vigorously advance the development of ganetespib in breast cancer in order to bring this option to patients. If its anti-cancer properties are maintained in the larger cohort analysis and subsequent larger trials, the drug has a real potential to receive consideration and approval by the FDA down the road. This would lead to huge gains for shareholders.
Two More Reasons I'm A Buyer
The analyst coverage on this stock should raise anyone's eyebrows. 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. What is more impressive is the company has a lot of cash to work with. They just issued a share offering back in November which slammed the stock. However, after the move the company's balance sheet is strong as it raised $12 million in the secondary share offering. 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.
While 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, the company could burn through cash in the next year and may have to do another offering), shares are a strong buy in my opinion, especially if you can get them under $5.00. I have been trading around my core position, buying when it gets under $5.00 and selling above $6.00 and $7.00 when it reaches there. However, I maintain a solid position, never trading more than 25% of it at a time. I currently have a $4.03 cost basis on shares. With more positive data to be released, I see shares eclipsing $10 in 2014, and could approach the median price target of over $16.00, which would be a triple bagger from current levels.