Evaluating Synta Pharmaceuticals' Cashflow

As with all small biotech companies, Synta Pharmaceuticals (SNTA) has yet to make a profit. They’ve financed their research and clinical trials through $195.4 million in private placements of common stock (venture capital) and $40.0 million from private placement of Series A convertible stock. They recently (2/6/07) went public and that brought in around $46 million. Additionally, early on, they received some money from government grants.

At the end of September, 2006, Synta had $57.6 million in the bank. Their burn rate for 2005 was $71.2 million offset a little by $2.3 million in investment income. Fourteen million was attributable to research and clinical trials pertaining to STA-4783 and $27.5 million was attributable to apilimod. The larger spending on aplimod is because it went through (failed) phase 3 clinical trials for psoriasis and Crohn’s disease in 2005.

So with about $103 million ($57.6+$46) in the bank and a burn rate of $71.2, Synta doesn’t have much time before they’ll run out of money. They estimate that they will need $40 to $60 million to complete the phase 3 trial for the melanoma drug (STA-4783), so I think the current burn rate will likely be the same or higher than 2005. The melanoma trial is supposed to start in mid-2007, with results for the primary endpoint at the end of 2008 and FDA approval (hopefully) in 2009. I guess if they reach their primary endpoint they will likely be able to get more financing (although the share value will be diluted), so they really just need to be able to make it through the end of 2008. It’s going to be a close call.

One problem with evaluating the financials of Synta at this point is that the numbers in the prospectus are fairly old (Sept 2006) and they haven’t filled a quarterly report yet, so it’s hard to get a firm grasp on when exactly the money will run out.

SNTA 2-mo chart

Disclosure: Author has no position in SNTA