GPC Biotech At A Glance

| About: GPC Biotech (GPCB)

GPC Biotech (GPCB) took a big hit [the stock closed at $20.36 on July 24 and opened at $13.35 on July 25] on July 25 when an FDA advisory panel voted unanimously to wait until a complete Phase 3 study of their drug Satraplatin is available. GPCB had been trading at over $32 on July 19. Often this type of price decline can be a good buying opportunity. Or not.

Satraplatin looks like a promising cancer drug. It’s related to cisplatin, a platinum containing drug that cross-links DNA. A big advantage of Satraplatin is that it’s taken orally, not an injection.

One important detail about Satraplatin: it was initially being developed by Bristol-Myers (NYSE:BMY), but they stopped a clinical trial after only 50 patients were treated due to “…low commercial priority for this drug by BMS at the time.” This is a valid explanation. A large company like Bristol-Myers just can’t make a big profit from a smaller drug such as Satraplatin. Sensing opportunity, Spectrum Pharmaceuticals (NASDAQ:SPPI) licensed the drug, and subsequently re-licensed it to GPCB.

Resistance to platinum drugs is becoming a problem. In a study published in Biochem. Pharmacol. (2007, 74, 20–27) in vitro resistance to cells engineered to be resistant to platinum crosslinkers was nearly 5 times less for Satraplatin than for either cisplatin or oxaliplatin. As both incidence of prostate cancer and resistance to Pt agents are rising, this bodes well for future sales.

The drug actually looks promising. Results of a 950 patient Phase 3 study published in Lancet Oncology (2007, 8, 290) as a second line treatment for hormone refractory prostate cancer [HRPC] were good. Six months after treatment, 30% of the Satraplatin cohort and 17% of the placebo group had not progressed: after one year these figures were 16% and 7%, respectively. Regardless, the FDA still wants to see a more complete dataset.

So, a company selling at steep discount with what looks to be a viable drug could be a bargain. Or it could still be overpriced. The FDA’s decision pushes approval of Satraplatin back to late 2008 in a best case scenario. According to GPC’s SEC filings, the primary patents covering Satraplatin expire in 2008 and 2010 in the United States, and in 2009 in most other countries. This leaves a very limited time frame in which to sell the drug before generic competition forces the price down. The chemistry of making Satraplatin is straightforward, so generic competition is pretty much assured.

Now, GPC can seek an extension of up to 5 years of patent coverage, but whether they obtain this or not is uncertain. Further, it remains uncertain even if the FDA will approve the drug after the final data is submitted. Also, it’s unclear how robust sales will be. While I do believe an orally available cross-linker will be of benefit, this won’t necessarily translate into sales. The company does have an antibody in a Phase 1 study, but that's years from any payoff.

The company has enough money to see them through the next couple of years. My take is even at this steep discount this stock is dead money.

GPCB 1-year chart