Event - European approval would start cash trickle for GTx

Date March 11, 2010

GTx’s Hail Mary pass, European approval of Acapodene for the prevention of fractures in men with prostate cancer undergoing androgen deprivation therapies (ADT), is nearing, but there is no sign that investors believe the result will be any different than the FDA’s negative decision late last year (FDA words not sticks and stones hurt GTx's bone drug, November 2, 2009). GTx shares have never recovered after losing half their value following a November complete response letter asking for new trials to demonstrate the safety of Acapodene and whether it affects the survival of men with prostate cancer.

In a sign that observers have already written off the drug in fracture prevention, analysts today are talking more of its promise in prevention of prostate cancer in men with high grade prostatic intraepithelial neoplasia (PIN), an indication for which it is in pivotal trials. Ominously, however, results of that phase III trial already have been put off from last year until the first half of 2010. Final data collection for its primary endpoint was expected to be completed in February, according to clinicaltrials.gov.

Product  Acapodene 
Company  GTx 
Market Cap  $133m 
Product NPV  n/a 
% of Market Cap  n/a 
Event type  EU advisory committee 
Date  1H 2010 
Could affect  Ipsen (EU partner) 

Shared revenue

European approval for the 80mg daily dose for bone protection, should it come, would not be the first time regulators on either side of the Atlantic have differed with each other. However, because of its European commercialisation strategy it is not the prize for GTx that FDA approval would have been.

GTx has partnered Acapodene, known generically as toremifene citrate, with Ipsen, with $12m in milestones due on approval in the ADT indication and royalties ranging from the mid-teens to mid-twenties. That milestone on approval would undoubtedly be a help for a company with an estimated $44m in cash at the end of 2009, but as a sustained revenue stream the European business is small potatoes.

Ipsen is expected to book $22m in Acapodene sales in 2014, according to EvaluatePharma consensus forecasts. By comparison, those forecasts in June 2009, prior to the FDA decision, estimated $357m in sales, all in the US, for GTx.

In the wake of the FDA complete response letter, GTx tried to reduce its estimated cash burn of $54m in 2009 by sacking 28% of its workforce in December. However, those savings may pale in comparison to the $30m-$35m of another phase III trial.

Safety concern

The FDA’s two concerns with the trials in the 80mg dose were on survival and disease progression and on venous thromboembolic events. The lower 20mg dose in the prevention trial could conceivably raise fewer safety concerns, but investors will not have a clear signal until the phase III readout.

Analysts who remain bullish on GTx point to earlier-phase candidates such as MK-2866, also known as ostarine, a selective androgen receptor modulator for wasting in partnership with Merck, and GTx-758, a hormone therapy for prostate cancer. However, Merck recently announced that it ended the partnership over MK-2866.

There is no doubt that a European approval of Acapodene would be a boost to GTx. However, the company will probably need more than the royalty income from the cancer drug to grow and thrive - a positive readout from the phase III trial in PIN would be a start.

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