MEMPHIS, Tenn. (
) -- Before the end of the current quarter,
is expected to announce top-line results from two phase III studies of a cancer-related muscle wasting drug known as enobosarm. And once again, one of my favorite fund manager sources is short GTx because he expects the enobosarm studies to fail.
This is the same fund manager who was most recently short
(CLSN - Get Report)
(CLSN - Get Report)
in anticipation of negative clinical trial data. He was
. Past performance doesn't always predict future results, but his track record is pretty damn good.
GTx shares are up 54% year to date, trading most recently at $6.96. Analysts who follow the company are bullish and have been telling clients to expect positive enobosarm study results. In other words, this is the ideal situation to make a contrarian bet on GTx, which is what my fund manager source is doing. [He's prohibited by his fund's rules from being quoted by name.]
Let's go over the short thesis on GTx and enobosarm but first some important background information.
Enobosarm is a selective androgen receptor modulator (SARM), a class of drugs designed to mimic the positive effects of testosterone or steroids but without the side effects or safety risks that can come with prolonged exposure.
GTx is developing enobosarm as a treatment for cancer cachexia, a progressive loss of weight and muscle mass which afflicts cancer patients. There are no currently approved treatments for cancer cachexia, but not for lack of trying. Over the years, several different classes of drugs, including steroids and testosterone, have been tried but none have demonstrated a significant clinical benefit. The challenge is finding a drug that will both increase muscle mass
improve muscle performance or function.
FDA will not approve a drug for cancer cachexia based on an increase in muscle mass alone. The drug must also improve a patient's life by demonstrating an increase in muscle function.
The design of GTX's two phase III cancer cachexia studies is fairly simple. Patients undergoing first-line chemotherapy treatment for non-small cell lung cancer with an accompanying diagnosis of cachexia are randomized to receive a daily, 3 mg dose of enobosarm or a placebo. After three months, the patients are assessed on two co-primary endpoints: 1) change in lean body mass (measured using an x-ray scan); and 2) physical function, defined as a 10 percent or greater improvement in the stair climb power test.
Enobosarm has to meet both co-primary endpoints with statistical significance for the studies to be successful.
Signals pointing to the failure of phase III clinical trials can often be found by digging through data from previously conducted clinical trials. In the case of enobosarm, GTx conducted a phase IIb study several years ago which enrolled 159 patients with assorted forms of cancer (a subset had lung cancer.) All the patients entered the study with a diagnosis of cachexia. As reported by GTx, treatment with enobosarm dosed at 1 mg and 3 mg increased lean body mass and improved muscle function compared to placebo.
Enobosarm's benefit was greatest at the 3 mg dose and in the subset of lung cancer patients, so this dose and patient group were used in the ongoing phase III studies.