GTx banks on clinical trials -- New drug, pending approval, targets bone and muscle wasting

The Commercial Appeal
July 22, 2006
By Daniel Connelly, Special to The Commercial Appeal

A clinical trial in Europe could help make or break the fortunes of Memphis-based drug company GTx Inc., which is burning cash as it tries to shepherd its drugs through the years-long federal approval process.

The firm, founded in 1997, has lined up elderly people in Germany and the United Kingdom for a trial of Ostarine, a new drug to prevent bone and muscle wasting.

"People are going to be watching (the trial) very, very carefully to see whether we're successful or not," said GTx chief executive Dr. Mitchell Steiner. "Because if we're successful, then we're going to have an opportunity to be a real player in the large market."

The firm also has two ongoing clinical trials for prostate cancer treatments.

Success for GTx would also be a coup for the biotech industry in Memphis. The firm, spun off from research at the University of Tennessee Health Science Center, went public in 2004 and has a powerful backer in AutoZone founder J.R. 'Pitt' Hyde III, who is now chairman of GTx's board of directors.

Firms like GTx are "poster children" for the concept of creating companies from academic research, said Steve Bares president and executive director of Memphis Bioworks Foundation, a group dedicated to promoting the biotech industry.

"The primary method that you get a robust bioscience cluster is you get really good at organic growth," he said.

Time matters for the young company, which like other biotech firms is betting on drug approval. It suffered a net loss of $9.9 million in the quarter ended March 31 and hopes to recoup its losses through future drug sales.

GTx opted to hold the latest trials in Europe because the regulatory process, though rigorous, moves faster there than in the United States, Steiner said.

Sixty elderly men and 60 postmenopausal women are enrolled in the trial of Ostarine.

The drug has already passed a first phase test of its safety. The second phase testing will determine whether the drug is effective. A third, much larger trial would further test the drug's safety and effectiveness.

Meanwhile, trials for two separate applications of the company's prostate cancer drug, Acapodene, are in the third stage. One trial involving 1,400 people in Argentina, Canada and the United States will determine if the drug will prevent precancerous lesions from developing into prostate cancer.

Another trial involving 1,400 people in Mexico and the United States is testing if the drug can reduce side effects for men undergoing chemical castration as treatment for prostate cancer.

The trials already have the attention of Wall Street, with some analysts saying GTx has a chance of breaking into lucrative markets related to bone and muscle wasting and prostate cancer.

If approved by the FDA, the two prostate cancer treatments could generate a total of $600 million annually in the United States, said Aaron Reames, an analyst with A.G. Edwards & Sons in New York.

A treatment to prevent precancerous lesions from developing into cancer would also improve the lives of countless men, he said.

"This would be absolutely an amazing development, period," Reames said.

He also said it appears likely that the drugs would be approved because their active ingredient, toremifene citrate, is already used in breast cancer treatment. GTx holds the license.

But he says predictions mean nothing until the clinical trials are over.

"Until you have the results in hand you can't make a judgment call," he said.

Analyst Gene Mack with HSBC has a "buy" recommendation for the stock.

He said that in addition to the prostate cancer drugs, Ostarine could also be a strong point for the company.

"The exciting thing about that drug is we've seen early, positive clinical data," he said.