Synta Pharmaceuticals GALAXY Interim Results

Synta looks set to start the Phase III stage of the GALAXY study of ganetespib in second-line non-small cell lung cancer (NSCLC) with broad entry criteria, after interim data suggested more consistent activity than was previously expected across key sub-groups. Synta has confirmed that the Phase III stage will enrol around 500 patients. A decision to enrol all comers with adenocarcinoma, if confirmed, is a potentially significant value-generating event for Synta, as our valuation currently assumes it will target a substantial minority of patients (ie 25-40%).

KRAS/LDH Data Leads To Broader Use
Interim data from the first stage of the Phase IIb/III study presented at ESMO suggest ganetespib has more consistent activity across the KRAS mutant/wild type and elevated/normal LDH subgroups than was indicated by prior data. Synta’s strategy may thus shift away from one that targets the poor prognosis but higher-responder subgroups to one addressing the broader adenocarcinoma population.

Clear OS Separation After 100 Days
The data show a strong evidence of an overall survival benefit, although this is evident only after around 100 days. This supports a new hypothesis that suggests if ganetespib can be given for a sufficient period, it may favourably change the biology of the tumour. This suggests that one possible strategy may be to refine the Phase III stage of GALAXY to target better prognosis patients -- those likely to be treated for 100 days or more -- possibly by excluding ones with metastases on entry or where diagnosis was made within six months.

CHIARA Study In ALK+ NSCLC
The separate CHIARA Phase II study of ganetespib as monotherapy in ALK-positive patients gives Synta two potential registration strategies directed at NSCLC. The Phase III start for ganetespib will confirm ganetespib’s position as the most advanced Hsp90 inhibitor in the field.

Valuation: $702m Or $11.40/share
For the time being we maintain our valuation of the R&D pipeline, excluding cash, at $702m, equivalent to $11.40 per share (basic), although this still assumes a 50% risk adjustment for all indications. The Phase III stage initiation and a strategy of addressing the broader population would add a significant contribution to the value.

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