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Synta Pharma announces new offering, trades lower

NEW YORK (AP) -- Shares of Synta Pharmaceuticals Inc. dropped Thursday as the company continued research on its cancer drug ganetespib and said it plans to register a new $300 million securities offering.

THE SPARK: Synta is a development-stage company with no products on the market. This month it will start enrolling patients in a late-stage trial of ganetespib as a secondary treatment for adenocarcinoma, a type of non-small cell lung cancer. The company expects to report results from that trial, called Galaxy-2, in 2014. It will report new data from an ongoing trial called Galaxy-1 in the next few months.

Synta raised about $60 million through a stock offering in December and said it had $100.6 million in cash on hand at the end of 2012. It said that is enough to continue operations into the second quarter of 2014. Synta can also issue another $28.6 million in securities based on previous registrations, and it said it plans to register another $300 million offering later this month.

The registration will allow Synta to sell new shares or other securities, although the company will not be required to do so. However companies usually trade lower when they announce that they may sell new shares because the new offering can dilute the value of the existing shares.

THE BIG PICTURE: The Lexington, Mass., company said in October that adenocarcinoma patients who were treated with ganetespib and the chemotherapy drug docetaxel are living longer than patients who were treated with docetaxel alone. Synta also says the combination of ganetespib and docetaxel halted the progression of cancer for longer than docetaxel alone.

Synta is studying ganetespib as a treatment for several other types of cancer and is running trials of other cancer drugs and anti-inflammatory medications.

The company reported its fourth-quarter results Thursday and said it lost $18.1 million, or 29 cents per share, in the fourth quarter. Analysts expected Synta to take a loss of 25 cents per share, according to FactSet.

Synta reported a loss of $62.8 million, or $1.06 per share, in 2012 after losing $47.4 million, or $1 per share, in 2011.

THE ANALYSIS: In a telephone interview, Stifel Nicolaus analyst Brian Klein said investors may be concerned about the upcoming study results for ganetespib. Klein noted that Synta is moving the drug into late-stage testing before it sees the final results from earlier trials. He said it's possible the final data from Galaxy-1 won't be as impressive as the interim results the company reported in 2012, and that would be a bad sign for Galaxy-2.

"If the benefit we saw in the interim deteriorates, that calls into question the design of the trial," Klein said. "The risk becomes 'was it appropriate for them to design the phase three trial based on just the interim analysis?'''.

Klein has a "Hold" rating on Synta shares.

SHARE ACTION: Synta Pharmaceuticals stock fell 32 cents, or 3.4 percent, to $9.03 in late trading after falling as much as 16.9 percent earlier in the day. The shares more than doubled in value between May 2012 and January 2013, reaching a high of $11.88 on Jan. 29. However the shares are down 21 percent from that price.