A Late-Stage Threshold for Success?

Shares of Threshold Pharmaceuticals (NASDAQ: THLD  ) popped nearly 8% in early trading today on the phase 3 initiation announcement for pancreatic cancer drug TH-302. While a licensing agreement put the trial financials in Merck's (NYSE: MRK  )  hands, Threshold's overreliance on one drug will make this a closely watched phase.

TH-302 targets low oxygen cells that show up in tumors more often than normal tissue. That means TH-302 poses less risk of damaging healthy cells while trying to take down a tumor. The drug's under a number of trials for different indications. But the investment world is focusing on its pancreatic trials where the drug tests alongside Eli Lilly (NYSE: LLY  ) 's Gemzar, a traditional front-line treatment that isn't enough for some patients.

The phase 3 trial has overall survival as its primary efficacy endpoint. Secondary endpoints include progression-free survival, safety, and general tolerability.

Optimism born from positive early trials eroded a bit in September, when mid-stage results showed a statistically insignificant overall survival rate compared to Gemzar alone. That's disappointing, but not a death knell. TH-302 did meet its primary goal of progression-free survival with an improvement of 63% compared to Gemzar. The phase 3 results need to show better data on the survival front to push TH-302 firmly toward the pack's front.

The pancreatic cancer market has a large population of contenders. Rising treatments include Celgene's Abraxane and Merrimack's MM-398. Threshold does have a unique pathway on its side. And the "right" cancer treatment depends on the patient, so there's room for a few competitors.

But research firm Decision Resources estimates that the global pancreatic cancer market won't see a ton of growth in the next decade. The firm estimates an $829 million global market by 2019, up from $693 million in 2009. That's not a lot of pie to go around.

Threshold is at a disadvantage because of its size (market cap around $300 million) and the fact that TH-302 is its only drug. If the phase 3 trial doesn't pan out, Threshold has serious problems on its hands. Merck's participation certainly helps. The licensing deal  included $280 million in development milestone payments and $245 million in sales milestones.

Foolish final thoughts
Threshold's last reported quarter showed cash and equivalents of $8 million with a cash burn of about $2 million. Those numbers aren't shocking for a company with one drug to its name.

TH-302's phase 3 trial won't report for a long while. In the meantime, keep an eye on the pipes for the other indications for another sign of strength. And it's essential to watch the competitors closely in a field this tightly packed.

Want to know more about the company behind Gemzar? Over the next two years, Eli Lilly will see nearly $0.40 of every $1.00 in sales exposed to generic competition. How does the company plan to respond to this huge patent cliff? Better yet, what does this mean for investors? In a brand new premium report on Eli Lilly, The Motley Fool's top pharmaceuticals analyst delves into everything investors need to know about the stock today. Simply click here now to claim your copy.


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  • Report this Comment On January 25, 2013, at 12:33 PM, Hope4GoodFuture wrote:

    Please take a look at Threshold's TH-302 phase II results in sarcoma. Phase III is expected to read out this year. Please help stop the wrongheaded market "buzz" that somehow Thld's future is inextricably linked to pancreatic cancer. It is just not true. For sarcoma alone, Thld is still a good value.

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