GRTX - Galera: Even Chance Of Success Or Failure In The Upcoming PDUFA

2023-07-31 09:55:03 ET

Summary

• GRTX has a PDUFA in 10 days.
• The stock is trading sideways.
• That is because the phase 3 trial was a success, but barely.

I covered Galera Therapeutics ( GRTX ) in December 2021, and since then, the stock has lost a lot of value. It has some upcoming catalysts, so it is time to take another look.

Last time when I covered GRTX, it had just run through a rollercoster ride. In October, it “failed” a pivotal trial and went down 70%. In December, it announced that the trial was actually a success and the confusion was because of some error committed by their CRO. The stock doubled. That was an unprecedented opportunity to make money, but nobody could have anticipated it.

Galera’s technology improves the effect of radiotherapy on cancer patients by converting radiation-induced superoxides to hydrogen peroxide. Lead candidate is Avasopasem manganese (avasopasem, or GC4419), a selective small-molecule dismutase mimetic. The molecule is in late-stage development to reduce the incidence and severity of radiotherapy-induced severe oral mucositis (SOM) in patients with head and neck cancer. The entire pipeline is this:

The same molecule is in two other indications or stages of trials. They also have a second molecule called Rucosopasem is also targeting two indications in phase 2 trials.

The company submitted an NDA to the FDA for Avasopasem in radiation-induced SOM. In that last article I discussed their successful phase 2 trial and how analysts were surprised when the trial initally “failed.” The same 90mg dose was used in both phases, and in phase 2 it produced a 34% reduction in SOM events. Now, while the phase 3 trial ultimately succeeded, here’s what I said about the updated data:

This trial produced a much reduced 16% reduction in SOM incidences, and unlike phase 2, where the p-value was a decent 0.009, this was a barely acceptable 0.045 after correction. The trial also failed to meet the endpoint of reduction in incidence of grade 4 OM, where the p-value stood at 0.052. It's only with reduction in median days of SOM that the trial did very well. This implies that when the drug does work, it produces a durable effect - but the drug does not work everywhere.

Thus, while the updated data met the endpoint, it did so barely, and was nothing as convincing as the phase 2 trial. Anyhow, the company filed for approval by year-end 2022, and the NDA was accepted in February. The FDA gave them a 6-month priority review with a PDUFA date of August 9, 2023. That was about 10 days from now. Since the FDA does not plan to hold an advisory committee meeting, approval, if it happens, can be any day now. The NDA is based on the two trials including the one that “failed.”

In other news for Avasopasem, the molecule successfully completed a phase 2 trial, successfully reducing esophagitis in patients with lung cancer receiving concurrent chemoradiotherapy. The AESOP trial enrolled 39 patients with unresectable stage 3A/3B or post-operative Stage 2B non-small cell (NSCLC) or limited-stage small cell (SCLC) lung cancers.

Key data :

The company said 35 patients received intensity-modulated radiation therapy (IMRT) plus chemotherapy and out of these 29 patients received at least five weeks of 90 mg of avasopasem on the days they underwent IMRT.

Galera said 2 out the 29 patients experienced Grade 3 ( defined as severely altered eating/swallowing; tube feeding, or hospitalization indicated) esophagitis at any time, with neither patient experiencing Grade 3 for more than one week.

No patients experienced Grade 4 (life-threatening consequences) or Grade 5 (death) esophagitis at any point during the trial.

The company added that these data compare favorably to the data in which ~20% to 30% of these patients experienced Grade 3 or 4 esophagitis.

In terms of safety as well, the molecule had a similar adverse events profile compared to the chemotherapy arm, meaning it did not add any AEs to the treatment burden.

Financials

GRTX has a market cap of $101mn and a cash balance of $48mn. Research and development expenses were $7.3 million in the first quarter of 2023, while general and administrative expenses were $6.6 million. At that rate, the company has just enough cash to see them through 2023. Earlier, the company raised $30mn in a secondary offering.

60% of the company is in retail hands, while 40% is held mainly by institutions. Key holders include Sofinnova and Alyeska. Insiders bought small amounts of stock in the last few years, but there were no sells.

Risks

GRTX is a very small company with all its associated risks. They are also at the end of their financial tether. Normally I would not cover a company like this, but GRTX has a near term PDUFA, and a reader asked for my opinion. I should also point out once again that the trial that failed, then succeeded again, barely did that, with a marginal statistical significance. Also note that oral mucositis caused by HNCC treatment has usually been managed by a variety of generic products, as well as antioxidants, growth factors and anti inflammatory agents. As such, GRTX has an uphill work capturing the market with this sort of so-so data.

Opinion

The stock is trading midway of its 52-week range, despite having a PDUFA in 10 days. This tells me what the market fears, which is similar to what I, too, am afraid of - the phase 3 trial of Avasopasem was a disaster in every way. Not only did that CRO thing caused havoc to the stock’s share price, but the updated data was barely acceptable, and not at all comparable to the phase 2’s success. On the other hand, the drug was well-tolerated, like placebo. So there’s an even chance of rejection or approval. Those are the odds some are willing to take; some aren’t. That is why the stock is not in as celebratory a mode as one would have preferred. If I am invested, I will hold on to my shares on the even chance that it will succeed; if I am not, I will stay on the sidelines on the odd chance that it will fail.

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