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“I have the ability to imagine configurations of the world different from today and really believe it can happen. I can imagine that soybean prices can double or that the dollar can fall to 100 yen. Second, I stay rational and disciplined under pressure. . . . When something happens to disturb my emotional equilibrium and my sense of what the world is like, I close out all positions related to that event.” Bruce Kovner.
FORGET ABOUT TECHNICALS, MY MONEY IS ON THIS GUY.
GALAXY-1 was designed to identify which patient populations would benefit most from Ganetespib.
GALAXY-2 includes only the chemosensitive population and excludes the remaining sub-groups. Smaller market opportunity. That's why you saw a 30%+ haircut after they report positive results at ASCO in June 2013.
I think this is the best analysis I have ever seen on SNTA. Nice work.
Unfortunately there is no method to value the pipeline at this point in time. It is all speculative and based upon 2 key factors - will the FDA approve the product? and what applications will the FDA approve the product for? The approval gives the value and the applications provides the multiplier.
Strategically I have changed my mind and don't think SNTA will be seeking takeover (not to say a hostile one couldn't happen). But I strongly feel Whitaker will be seeking partners to develop sales. It is just not feasible for SNTA with it's size to consider adding and training a sales force. So to get products to market (once FDA approved) in a timely manner I feel we will see some partnering announcements (involving capital infusions in the form of royalty payments and the utilization of a bigger company marketing and sales team) to get the drug(s) to market.
Thanks for the post. Two follow-ups:
1. Re: Narrowing the Demographics - can you elaborate on this? And your take on what this means?
2. Re: Investors - I think this is a by-product of execution (to your point), but there clearly is new money coming into the name, which the Board appears to have done a solid job over the past six months.
Think it all depends on how you define risk / reward re: significant movement. If the stock has indeed found support at / around $4, then I think a move above $5 is a pretty significant move.
Interim analysis of GALAXY-2 in slated for the 2H of 2015. So I don't see significant movement until then.
Also, remember they narrowed the patient demographic quite a bit from GALAXY-1 trial, so the market (revenue) potential is also constricted.
HDC platform a long way off.
As for the CEO, I wouldn't get too excited just yet. Let's see if she can do a better job than Safi drawing in outside investors.
That said, the stock seems to found strong support around $4.
Trial results will tell the tale, obviously.
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As to your first question....the only reason that early FDA approval is possible is because of the fact that NSCLC has an unmet medical need. The degree of the possibility is not known...it all lies on the progress of patients in the trial. If ongoing treatments meet FDA thresholds for meeting the unmet need then early approval happens. So, if threshold is not met then the drug may not be approved at all or the drug may be approved after the conclusion of the trial.
Thought # 1 - In recent months/years, SNTA has had a very high short percentage of float. The past high short percentage of float could be due to true investor sentiment on the expectations of negative performance but in the next year short manipulation is to be expected because of the past success of short positions. Throughout the next year short manipulation is to be expected because of the past success of short investing SNTA. This is a natural phenomenon of stocks in this particular phase of growth.
Thought # 2 - It seems that the board of directors have always focused on bringing ganetespib to market. Past decisions and actions have been fine tuned and the hiring of Anne Whitaker was the culmination of the best thought out plan to date. The thoughts of a successful launch of ganetspib in the marketplace became thoughts of launching the product globally....hiring Anne Whitaker brings the thoughts and plans of the board close to becoming reality.
Sentiment: Strong Buy
Really well thought out post. Thank you. Is there anyone out there who can walk through some of the negative scenarios for the Company over the next year (and more importantly, why?).
One question / two thoughts:
* Question: Would you elaborate on the fast track for NSCLC (believe that is GALAXY-2 which is currently enrolling)? If this is correct, I would think there is still significant runway until FDA approval.
* Thought: I don't put much credence into 'the shorts' driving the stock down versus the company simply executing on a consistent basis and being fairly valued
* Thought: I think the new CEO brings a lot of credibility coming from the big pharma side, so I think she will bring great focus towards commercialization (FDA approval) and distribution. One thing I found digging into my research is an initiative the Executive Committee put in place back in April 2014, which was retaining the Navicor Group to focus on the marketing strategy for ganetespib in what I would think is a complete re-branding and future drug roll-out. Would love to gain more color / thoughts as to what, if anything to dig further into
The list of potential announcements (hopefully good news announcements) in 2015 are numerous. The stock price has consolidated and continues to consolidate around the $4 per share area. The slow methodical growth of the stock price may begin at any time from here going into 2015 and beyond. As the price grows the shorts will try to hold it down but the frequent news events will put a squelch on short activity overall.
There is a potential for unexpected good news because of the fact that the FDA granted fast track designation of ganetespib in non-small cell lung cancer. News could come out on the early FDA approval for this indication if the existing trial has good outcome results for a significant percentage of patients. An early FDA approval announcement would catch shorts in a huge covering mode which could propel the stock much higher.
Near term unexpected announcements could include partnership agreements for global marketing of ganetespib. Anne Whitaker has a great background in the commercialization of new drug products and will more than likely develop a strategy for taking ganetespib to markets worldwide. Involving a partner prior to FDA approval would be a smart move so that once approval is granted....the product takes off running. A high caliber CEO like Ms. Whitaker may prove to be one of the best moves that Synta has ever made.
Other potential unexpected announcements could include the commencement of clinical trials with HDC platform drug products. Being that the payload drug products that are being linked to the heat shock protein inhibitor moiety are already FDQ approved for the treatment of various cancers it may not be difficult to get the clinical trials started.
The upcoming period for Synta is very interesting and investors know that there are many possibilities that could push the stock price much higher. I would not be surprised to see the stock price somewhere between $10 and $20 within the next year
Sentiment: Strong Buy
I agree, maybe slight pop this year in the $4-6 range, any significant moves next year. I think something big happens in 2015, either buyout or further advancement of ganetspib, or both combined etc.
And I agree, institutions or big names (like Kovner did) are going to start taking big stakes, the upside is huge. Biotechs/pharmaceuticals have been hugely lucrative, and SNTA has all the right pieces in place.
Looking out over the next 15 months...
SNTA has an EV of about $300 million, as it has ~$115 million in the bank. 900+ patents, new CEO and a pipeline of drugs in Phases 2 & 3. Overall opportunity market for their ganetespib pipeline worth $1 billion in annual sales (if anyone has better numbers, all ears). Next expected updates re: clinical trails on / about 15-Sept.
So looking out...
* Downside - goes to ~$1 ($100 million market cap) - clinical information does not indicate significant impact; more capital required; company considers selling off assets
* Upside - goes to ~$10 ($1.1 billion market cap) - continued progress; gets a fair distribution deal completed)
* EOY2014 Target = $5 - $5.50 - I've reviewed this though progress in other posts
* I see near-term downside ~$3.75 - stock has illustrated great support at / around that $3.80 - $3.90 level with new money buying the current shelf (about $35 - $40 million remaining)
* Potential Take-out Value (2015 / 2016) = $1.5 - $2 Billion market cap (represents a share price $13.60 - $18.20 using 110 million shares)
I speculate on/before next set of 13-F's are filed (15-Nov), a new institutional investor will file a 13-D (disclosing they own 5% or more of the shares).
Any constructive thoughts? Also, if anyone has any information re: how to value their pipeline, would appreciate it. Thank you.