Ganetespib has shown modest single agent activity, most notably in tumors with specific genetic alterations (such as ALK+, HER2+, BRAF+, triple negative BC). SNTA decided to bet the farm on the evaluation of ganetespib in combination with the chemotherapy agent docetaxel in non-small cell lung cancer (NSCLC). The company moved from a tiny phase 1b study in a large global phase 2b study dubbed GALAXY-1, which was intended to define a targeted patient population for, and substantially de-risk, a subsequent phase 3.
SNTA management has stuck to that script, but the reality is the company has proceeded through a bizarre series of changes to the study population, key endpoints, and data analysis over the past couple years. Depending on which month you descended from outer space, you might have thought that histology (squamous vs. adenocarcinoma), EGFR mutation status, KRAS mutation status, LDH levels, time since diagnosis with lung cancer, or country of clinical trial enrollment was the key to interpreting the ganetespib data [that was from memory, perhaps I missed a couple].
At each cut of data from this open-label clinical trial, the company has moved the analytical and statistical goal posts in their favor, so it is no wonder that they continue refine a "subset" of patients with a dramatic "statistical" efficacy improvement (progression-free or overall survival) vs. docetaxel alone. At this point, the key data set they have been presenting doesn't even represent any of the co-primary or key secondary endpoints. The investment community seem to finally be wise to the act, based on the valuation of < $500m for this phase 3 oncology asset and the poor stock performance in the recent biotech bull market (see chart in TheStreet link above). Those who take an objective look at the data see this drug for what it is - slightly synergistic with docetaxel, with an uncertain real-world future.
The end result of all the machinations? GALAXY-1 will fail to achieve the goals of a smaller, targeted, and de-risked phase 3 clinical trial. GALAXY-2's required enrollment will be double what SNTA originally claimed, and now will be a larger phase 3 trial than even PPHM is running with bavituximab in the same setting second-line lung cancer setting. GALAXY-1 final OS data is due in the first half of 2014 but the results presented by SNTA will be largely uninterpretable (and their statistical evaluations meaningless).
So where are we now, and why is the CEO out right now? Let's take a look at what has transpired since the most recent public data release in October 2013 at WCLC. I think we can safely presume the company has taken at least one more look at the data (I'll note that the ASCO abstract deadline was February 4th and the late-breaker deadline is April 1st). If the data have gotten dramatically worse, that would clearly explain the CEO's exit. I believe reality is probably more nuanced, perhaps a continuation of the gradual decline in the performance of ganetespib. There has been so much slicing and dicing of the data already that is seems difficult to imagine a huge change from the "1-year follow-up" to the "final" data.
Instead, I think the key members of the board of directors (especially Chairman Keith Gollust, a 4% owner who will head the new Executive Committee and Bruce Kovner who controls more than a third of SNTA shares) have seen the light over the past several months and recognize that GALAXY-2 is doomed to failure or, at best, irrelevance. Over the past ~ six months, the company has been steadily ramping up newsflow for less-advanced projects, including ganetespib in breast cancer (multiple data presentations, including one largely seen as having bizarre timing) and ovarian cancer / AML (new clinical trials), and their HDC drug conjugate platform (launched in September with additional recent newsflow).
SNTA has been operating on limited cash runway for years, relying on frequent capital raises dominated by the controlling insiders (and therefore often at "poor" prices), most recently in November 2013. At the March 11th 4q2013 earnings conference call, I estimate the company will report less than $70m net cash. The company does not have enough money to see the GALAXY program through to pivotal data, let alone funding other indications, the HDC platform, or floating the company beyond GALAXY data to a potential FDA approval (~2016). The theoretical solution to the cash problem is a corporate partnership for ganetespib, which the company originally sought starting back in 2010. They have never delivered, and in December 2013 the key business development executive over that time period (whose key job was to deliver that deal it would seem), departed the company.
What's next for SNTA? Well we will have to wait a week (at the minimum) to find out. I asked the company this morning whether they would still attend the Cowen conference 3/5 and the Roth conference 3/10, and if so who would present. I didn't hear back but we got our answer tonight in an 8-k filing: No, they have cancelled. That means we have to wait for the 4q2013 earnings conference call on 3/11 for an update.
For what it's worth, here are my thoughts / predictions going forward (sorry to say I don't break out the crystal ball as often anymore...it is a good exercise):
- The BOD wanted to terminate the GALAXY-2 program and Bahcall refused to go along, therefore he is out. I don't think they will admit this on 3/11 CC unless they also present final GALAXY-1 data at the same time.
- At the latest, GALAXY-2 will survive to the interim analysis later in 2014. SNTA will attribute the decision to stop the trial financial stewardship, regulatory challenges, and/or the competitive landscape. They will of course not accept responsibility for screwing up whatever chance they had via the GALAXY-1 charades.
- Clinical development of ganetespib will continue in certain indications are discussed above.
- SNTA will institute a restructuring in relation to the above to reduce the burn rate (currently >$20m per quarter).
- There is a chance they will announce the exploration of strategic options, but I really can't see there being that much interest or much of a premium. But if Kovner wants to sell, he would seem likely to get his way.
- Increased focus will turn to the HDC platform, which will churn out steady newsflow (in mice) but will never result in a meaningful partnership or drug.
- If you start hearing about elesclomol or CRACM inhibitors again, things are even worse than I thought!
Insider ownership ~45%
Shares short ~17%
February 2014 SNTA Corporate Slide Deck