Synta Pharmaceuticals Corp (NASDAQ:SNTA) Due For A Bounce

Shares of Synta Pharmaceuticals Corp (NASDAQ:SNTA) have been taken to the woodshed in the past year. Shares really accelerated to the downside after Synta announced that its lead drug, ganetespib, an Hsp90 inhibitor, was being discontinued in its phase 3 GALAXY-2 trial. An independent data-monitoring committee determined that it was unlikely to meet its primary endpoint of a statistically significant improvement in overall survival over the placebo in a lung cancer study. Now investors are asking what's next. We think shares are due for a bounce due to high insider ownership and its $88 million in cash on its balance sheet. Currently trading at just a $33 market cap, we think there's still value in Synta.Synta Pharmaceuticals describes itself as an innovative, agile biopharmaceutical company focused on research, development and commercialization of novel oncology medicines that have the potential to change the lives of cancer patients. Synta’s oncology drug candidate, ganetespib, a novel heat shock protein 90 (Hsp90) inhibitor, is currently being evaluated in several investigator sponsored clinical trials including clinical trials in acute myeloid leukemia (AML), ovarian cancer, breast cancer, and other tumor types. Building on its extensive expertise in the science of Hsp90, Synta also has a novel proprietary Hsp90 inhibitor Drug Conjugate (HDC) small molecule drug development program. IND enabling studies have commenced for the lead candidate from the HDC program, STA-12-8666, and preclinical evaluation of additional HDC candidates is ongoing.

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In October, Synta announced that the Company has decided to terminate the Phase 3 GALAXY-2 trial of ganetespib and docetaxel in the second-line treatment of patients with advanced non-small cell lung adenocarcinoma. Based on the review of a pre-planned interim analysis, the study’s Independent Data Monitoring Committee (IDMC) concluded that the addition of ganetespib to docetaxel is unlikely to demonstrate a statistically significant improvement in the primary endpoint of overall survival compared to docetaxel alone. The IDMC noted that the combination of ganetespib and docetaxel was generally well tolerated in the study, with an adverse event profile consistent with previous studies combining these agents.

GALAXY-2 is a Phase 3 global, randomized, multi-center trial. Synta continues to support enrollment in four additional large, randomized, multi-center investigator-sponsored studies, including: the GANNET53 trial of ganetespib and paclitaxel in ovarian cancer; the AML LI-1 trial of ganetespib with low dose cytarabine (Ara-C) in acute myeloid leukemia (AML) and high-risk myelodysplastic syndrome (MDS); the AML18 trial of ganetespib with standard DA (daunorubicin and Ara-C) in AML and high-risk MDS; and the I-SPY 2 TRIAL of ganetespib and standard chemotherapy in women with newly diagnosed, locally advanced breast cancer.

At the time, CEO Chen Schor said:

“This disappointing outcome underscores the challenges of treating lung cancer in the second-line setting and determining the precise population for whom ganetespib may be most effective. We thank the patients, caregivers and investigators who participated in GALAAXY-2. Despite the outcome of this trial, and pending discussions with the relevant investigators, we will continue to support ongoing investigator-sponsored studies while we determine the appropriate path forward for ganetespib. We also look forward to advancing candidates from our HDC platform into the clinic. With the significant cash reserves we have in hand, our pipeline, our scientific internal leadership and network of advisors, we expect to undertake a comprehensive review of our strategy going forward."

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To conserve cash, Synta laid off 60% of its workforce. This will allow the company to operate until the middle of 2017 without raising any additional funds. The biggest question mark is what does the company's largest shareholder and director Bruce Kovner do to salvage his investment in Synta. He owns 3 million shares personally and his investment firm Caxton Corp owns another 37 million shares. Bruce Kovner looks to be consolidating his position after the appointment of Scott Morenstein to its Board of Directors. He is a Managing Director at CAM Capital, a private investment company established by Bruce Kovner focused on investment, trading and business activities. Prior to joining CAM Capital, Morenstein was a Managing Director of Valence Life Sciences and Caxton Advantage Venture Partners, venture capital firms focused on late-stage investing in private and small cap public drug development companies. He was previously a healthcare investment banker and research analyst at Lehman Brothers and Seaview Securities.Morenstein's resume as a health care investment banker indicates to us that he's going to work on a sale of the company. This is the best solution in our opinion. With $88 million cash and only a $33 million market cap, we think this will be a pretty easy deal for him to accomplish. With shares as low as they currently are, they are due for a bounce in our opinion. We will be updating Insider Financial with the latest developments on SNTA. Sign up today to stay in the loop!Disclosure: We have no position in SNTA either long or short. We have not been compensated for this article.