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Shares of biopharma GTx rocket on merger with cancer-therapeutics specialist Oncternal Therapeutics

Shareholders of Oncternal will hold roughly 75% of the combined company's shares
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Dr James Breitmeyer, co-founder and CEO of Oncternal, will take the helm of the combined company

Shares of GTx Inc (Nasdaq:GTXI) surged Thursday after agreeing to merge with Oncternal Therapeutics, a privately-held cancer-therapeutics specialist, in an all-stock deal.

Under the deal’s terms, shareholders of Oncternal will take control of GTx, a Memphis-based biopharmaceutical group that also focuses on cancer. Oncternal will hold roughly 75% of the stock in the combined company, which will be named Oncternal Therapeutics and trade on the Nasdaq under the ticker ONCT once the transaction closes.

Dr James Breitmeyer, co-founder and CEO of Oncternal, will take the helm of the new organization.

“This merger introduces Oncternal and its promising oncology pipeline to the public market and provides additional capital resources to advance our programs to potential value inflection points,” said Breitmeyer in a statement.

READ: GTx stock crushed after Phase 2 trial failure; Baird downgrades company shares

In response, investors sent GTx shares up more than 50% to $1.41 in morning trade Thursday.

Michael Ulz, senior research analyst with Baird Equity Research, was also bullish on the tie-up, but is sticking to a Neutral rating and a $2 price target on GTx.

"The merger meaningfully expands the oncology pipeline and provides for multiple catalysts within the current cash runway," he wrote in a note to investors.

The new company, which will be headquartered in San Diego, California, will boast a robust pipeline of promising oncology drug programs.

Oncternal’s lead therapy is cirmtuzumab, an anti-ROR1 monoclonal antibody, which is currently in a Phase1/2 trial in combination with ibrutinib for the treatment of chronic lymphocytic leukemia and mantle cell lymphoma.

GTx’s Selective Androgen Receptor Degrader (SARD) program, meanwhile, is a pre-clinical program designed to treat castration-resistant prostate cancer in men who are non-responsive to current therapies.

READ: GTx shares surge on positive enobosarm trial data

Post-merger, which is set to close in the second quarter of this year, the combined company’s cash and short-term investments are set to be about $26 million. These funds are expected to be enough to advance Oncternal’s programs into the second quarter of 2020, including the Phase 2 study of cirmtuzumab and ibrutinib.

No GTx employees are expected to remain at the combined company. But the new company’s board will include Robert Wills and Michael Carter, who now sit on GTx’s board.  

Keeping control of 25% of the new company, GTx shareholders will also receive a non-transferrable contingent value right (CVR) for each share, which entitles them to receive 50% of the net proceeds from the grant, sale or transfer of rights to selective androgen receptor degrader (SARD) or selective androgen receptor modulator (SARM) technology during the CVR’s term. The deal also allows for wins from royalties on the sale of SARD products by the new company during the CVR’s term.

Contact Ellen Kelleher at [email protected] 

-- updated with Baird analyst commentary --

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