Synta Pharma: GALAXY Interim Results

Synta has disclosed the much-anticipated data that supported a decision to go ahead with the Phase III stage of its GALAXY study of ganetespib in second-line, non-small cell lung cancer (NSCLC). The data show encouraging signs of efficacy, including a 2.5 to 3-fold improvement in PFS in two subgroups of adenocarcinoma, namely those with mutant KRAS and with elevated LDH. Improvements were seen in PFS and OS (with separation of the Kaplan-Meier curves) in the all adenocarcinoma group, but not in non-adeno. However, the decision not to disclose the statistical data on these results, seemingly for good reasons, panicked the market.

2.5x increase In PFS In KRAS And 3x In High LDH
The data show a solid increase -- from 1.4-1.6 to 4.2 months -- in progression free survival (PFS) in two key subgroups of adenocarcinoma: elevated LDH and mutant KRAS, both of which correlate with poor response. No effect, however, was seen in the non-adenocarcinoma group. The study now recruits adenocarcinoma only and will render more mature data in Q3. Synta intends to present the interim data at a medical conference later in the year, probably at ESMO (28 September-2 October).

But The Market Takes The (Lack Of) p Badly
Synta’s decision not to disclose statistics (p values or hazard ratios) for the subgroups (it cited a number of reasons including the immaturity of the data and the small size of the subgroups) spooked the market, triggering a surprise 33% sell-off in the stock. The share price had, however, risen strongly in anticipation of the data and has since started to recover.

CHIARA Study Aiming For Clear Signal In ALK+
The separate CHIARA Phase II study of ganetespib, as monotherapy, in ALK-positive NSCLC, gives Synta two registration directed strategies in NSCLC, confirming ganetespib’s position as the most advanced Hsp90 inhibitor.

Valuation: $702m Or $12.20/share
We maintain our valuation of the R&D pipeline of $702m, equivalent to $12.20 per share (basic), without adjusting for cash. By comparison, Synta’s EV is currently $268m, highlighting an attractive investment case. Furthermore, we continue to assume a 50% risk adjustment for all indications (lower than is typical for a Phase III asset), pending definitive data from the Phase IIb stage.

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