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 (MRK 2.93%) 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 (LLY -1.00%)'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.
