Synta Pharma (SNTA): Price: $1.97; Market Cap (MM): $66.8
Market Perform; Simos Simeonidis, Ph.D.
Senior Biotechnology Analyst
Synta cuts 42% of workforce; waiting for strategic alternatives guidance
The News: Synta announced today a 42% reduction in its workforce, laying off 90 employees, in an effort to preserve its cash balance, following the failure of the Phase III melanoma trial with Elescomol, the company's only late stage program.
Our view: This was an anticipated and absolutely necessary first step, given that the company's most valuable and tangible asset is their cash position, and it would make no sense to continue spending like a Phase III company with a big Pharma partner, given the Elescomol failure in melanoma and the uncertainty around the future of the GlaxoSmithKline partnership (GSK, Not Rated).
What's next for Synta? 1) An analysis of the data on what may have caused the imbalance of deaths will occur in the upcoming weeks, 2) GSK's decision on whether to give the compound back to Synta and end the partnership or continue its development and 3) the company's guidance on what its plans are going forward in terms of strategic alternatives.
We would also expect management to act promptly to further preserve the current cash position, and in addition to today's restructuring effort (that still leaves the company with a significant workforce for a company of its stage), to explore strategic alternatives that may eventually return some value to current SNTA holders, including A) bringing in a later stage asset through a potential merger (or reverse merger), and/or B) the sale of the company's remaining assets, and the return of cash to existing shareholders. We believe that given the current market environment, it would be unwise for the company to continue spending in unproven and highly risky, early stage programs.
Our view on what's coming up: It would be mere conjecture to attempt to speculate on what may have caused the excess deaths in the patients treated with Elescomol. We believe however that it is highly unlikely that we will see further development on Elescomol in melanoma, or in other solid tumors, given the excess deaths observed in the Phase III trial.