UPDATE 4-GTx prostate cancer drug needs more study; shares hit

(Recasts; adds company comments; updates share movement)

By Varsha Tickoo

BANGALORE May 23 (Reuters) - GTx Inc (GTXI.O) said interim data from the late-stage trial of its prostate cancer drug was not statistically significant enough to seek marketing approval from U.S. health regulators, sending the biotechnology company's shares down as much as 14 percent.

The company will now continue the trial of the drug, toremifene, which has the brand name Acapodene, and will have to wait till mid-2009 to submit final efficacy data to the U.S. Food and Drug Administration.

GTx spokesman McDavid Stilwell said the company was confident that final results from the late-stage trial would meet the requirements for approval.

At least three analysts said the outcome of the interim analysis by an independent group was expected, as the FDA had set a high bar for statistical significance on the interim analysis of the effectiveness of the drug in preventing prostate cancer.

Shares of GTx, which fell as much as $2.26 to $13.98, recovered some losses to trade down 9 percent at $14.78 Friday afternoon on Nasdaq.

"Few were optimistic about the interim results hitting given the high statistical hurdle. We believe negative interpretation of today's announcement could have a psychological impact on the stock," Wachovia analyst Aaron Reames said in a note to clients.

Reames kept an "outperform" rating on the stock.

Certain encouraging data from a mid-stage trial hinted that the upcoming analysis would have higher odds of success, analysts said.

"Missing the endpoint now does not reduce the trial's chance for success in another year, we believe, based on the encouraging Phase IIb results," David Webber from Broadpoint Capital Inc said in a note to clients.

Webber maintained a "buy" rating and a $29 price target on the stock.

Lazard Capital Markets analyst Joel Sendek also kept his "buy" rating and $36 price target on the stock and echoed Reames' and Webber's views.

However, Cowen & Co analyst Eric Schmidt cut his rating on the stock to "neutral" from "outperform," and said the interim analysis indicated it is unlikely that final data would be positive.

GTx did not receive data from the interim efficacy analysis, it said in a news release.

The biotechnology company is also testing toremifene in advanced breast cancer and side effects of androgen deprivation therapy (ADT), the most common treatment for prostate cancer.

"While Acapodene is the only drug shown to reduce fractures in men on ADT, and could achieve U.S. sales of $100 million to $200 million, FDA approval carries some risk in today's safety-conscious environment," Cowen's Schmidt said in a note to clients.

In the late-stage trial, toremifene is being given to men suffering from high-grade prostatic intraepithelial neoplasia, a condition that could be a precursor to prostate cancer, as a 20 mg dose. The main goal of the trial is prostate cancer incidence.

The trial involves 1,590 men in the United States and Canada, the Memphis, Tennessee-based company said. (Editing by Pratish Narayanan)