A Look At Synta Pharmaceuticals

Synta’s investment case now effectively rests on the success of ganetespib in its two target registration indications of non-small cell lung cancer (NSCLC) and metastatic breast cancer (mBC). Following a $60m fund-raising last year, Synta is poised to embark on the c 500 patient GALAXY-2 Phase III study of ganetespib in second-line NSCLC. This will run in parallel with its CHIARA Phase II study in ALK+ NSCLC, while a separate Phase II study is underway in mBC. We have revised our rNPV to reflect Synta’s effectively exclusive focus on ganetespib and now indicate a valuation of $791m or $11.48/share (basic) or $11.00/share (fully diluted).

Aim To Exploit Survival Advantage In Better Prognosis
The GALAXY-2 study in second-line NSCLC will start recruitment in early 2013. The study will enrol c 500 patients who were diagnosed at least six months prior to the time of entry, thereby excluding patients of poor prognosis based on progression (about 30% of total). This design is based on interim data from GALAXY-1, which showed that the survival advantage was greatest in these better prognosis patients.

CHIARA Study In ALK+ NSCLC
The CHIARA Phase II study of ganetespib as monotherapy in ALK-positive, crizotinib- naïve patients gives the drug a second potential indication in NSCLC, assuming the trial can enrol patients and demonstrates a robust response rate, duration of response and good safety profile.

Multiple Data Points From GALAXY-1 And 2
Synta expects to release more overall survival (OS) and PFS data of the ITT group and sub-populations of GALAXY-1 during 2013 that could shape its registration strategy. The speed of GALAXY-2 enrolment will determine the timing of the interim and final analysis of this trial, tentatively scheduled for the first and second half of 2014.

Valuation: $791m Or $11.48 Per Share
Our updated valuation reflects Synta’s principal focus on ganetespib in the two main indications of NSCLC (second-line and ALK+) and mBC. We calculate an rNPV of ganetespib in these two indications of $743m, using a conservative 50% (for a Phase II/III asset) probability in NSCLC. Adding year-end 2013 net cash ($23m) and a nominal value of $25m for other assets, we derive a total firm value of $791m, which is equivalent to $11.48/share ($11.00 per share, fully diluted). We would expect to apply a more normal 65% Phase III probability, which would give rise to a higher valuation, if final Phase II OS data from GALAXY-1 are positive.