Wednesday, March 03, 2010

Merck/GTX: If a Collaboration Fails in the Forest, Does it Make a Sound?

As goes the old saying, sometimes the bear gets you. And sometimes the bear gets you and you don't really want to talk about it.

Such appears to be the case at GTX Inc.

GTX has since 2007 collaborated with Merck & Co. in the area of selective androgen receptor modulators to treat muscle and bone disorders. As part of that deal, Merck licensed from GTX the then-Phase II ostarine, a SARM in development for muscle loss in cancer patients. GTX got $40 million up-front and was eligible for about $422 million in milestones. The product was given the snazzy new nickname MK-2866. We covered the deal here.

But as often happens after a big merger (like Merck's Schering-Plough deal), there is some R&D fall out. We heard from Merck's new SVP and head of worldwide licensing David Nicholson at our PSO meeting last week that there is "no way Merck can afford to develop everything" in its R&D program ... "Our R&D model is to generate a lot of output - more than we can deal with," he said.

And so it shouldn't come as a surprise that Merck is opting out of some of its externalized R&D as well. Deep in the forest of Merck's 10-k you'll find this nugget:

Also in 2007, Old Merck and GTx, Inc. (“GTx”) entered into an agreement providing for a research and development and global strategic collaboration for selective androgen receptor modulators (“SARMs”), a new class of drugs with the potential to treat age-related muscle loss (sarcopenia) as well as other musculoskeletal conditions. Merck has discontinued internal development of MK-2866 (which is a SARM) under this agreement, and is currently discussing next steps with GTx.
Merck put out its 10-k on Monday. Not an official peep yet from GTX.

GTX has been reeling since last year when it received a surprise complete response letter from FDA around a different product, the 80mg dose of the selective estrogen receptor modulator toremifine. GTX was hoping to get the product licensed to reduce bone fractures in men receiving prostate cancer treatment.

News of the CRL sliced the company's market cap in half and then some, down to around $150 million, where it still hovers. If investors know about the setback around MK-2866, it hasn't registered in the marketplace. Perhaps the market is ambivalent--or confident in GTX's ability to make lemonade. Not every broken up alliance necessarily spells doom for a product, after all (Tracleer did OK after Genentech bowed out, Exelixis has done well licensing products GSK decided not to opt-into, etc.)

At the end of the third quarter 2009, GTX had about $55 million in cash. It reports full year numbers on March 15.

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