After Gtx Inc.'s only clinical candidate, selective androgen receptor modulator (SARM) enobosarm, failed to improve stress urinary incontinence in postmenopausal women, the company underwent a review of strategic alternatives. (See BioWorld, Sept. 24, 2018.)

The result was the courting of Oncternal Therapeutics Inc., which agreed to merge with Memphis, Tenn.-based Gtx in an all-stock deal.

Former shareholders of Oncternal will own 75 percent of the new public company, which will be named Oncternal Therapeutics and be led by Oncternal's management team from the company's home base in San Diego.

Investors were excited about the bittersweet news of the winding down of Gtx, which was formed in 1997 and tested enobosarm in a whopping 27 different clinical studies. Shares of Gtx (NASDAQ:GTXI) jumped 62 cents, or 67.7 percent, to $1.54 on Thursday.

Oncternal had been "laying out a path to being public sometime in the next year and a right reverse merger had always been a possibility," James Breitmeyer, co-founder, president and CEO of Oncternal, told BioWorld. "When this came up, and we were such a good fit, we were delighted to move forward with this transaction at this time."

Oncternal got on Gtx's short list of potential suitors through relationships between members of the boards of the two companies, but Breitmeyer noted that Oncternal was "one of several parties that were in competition to close a transaction with Gtx."

In addition to owning 25 percent of the new company, Gtx's former shareholders also get a contingent value right (CVR) entitling the holders to 50 percent of any proceeds on sales of programs that are developed from Gtx's selective androgen receptor degrader (SARD) or SARM technologies. If Oncternal retains and markets the drugs, CVR holders will get a high single-digit royalty on sales of the drug for 15 years from when the deal closes. The potential CVR payments will be used to offset half of the development costs, either up front, in the case of a sale, or through a lower initial royalty rate.

Gtx's preclinical SARD program is designed to combat castration-resistant prostate cancer when mutations cause the androgen receptor to become activated. SARDs are designed to induce degradation of the androgen receptor, alleviating the activation mutation.

"That's a long sought out attribute for what would be the next generation of androgen antagonists for prostate cancer," Breitmeyer explained of the ability to degrade the receptor.

Breitmeyer has experience in prostate cancer, having been the president of Bavarian Nordic Inc., where he led the development of a prostate cancer vaccine, and put together a team in San Diego to evaluate Gtx's SARD program and work on the project going forward. The process was made easier by the expertise that came from other San Diego-based companies that have worked in the prostate cancer space, including Ligand Pharmaceuticals Inc. and Aragon Pharmaceuticals Inc.

Oncternal is open to either internal development or out-licensing the SARD. Breitmeyer said he sees the sweet spots for the latter as either when the drug candidate is ready for IND submission or at the next value-inflection point after proof of concept in a human study, which Breitmeyer noted could be relatively easy to discern. "When they're effective, they have prompt effect on PSA levels," he said of effects of androgen antagonists on prostate-specific antigen (PSA).

To the deal, Oncternal brings a pair of clinical-stage compounds and a preclinical program.

The company's lead program, cirmtuzumab, is an anti-ROR1 monoclonal antibody in a phase I/II trial in combination with Imbruvica (ibrutinib, Abbvie Inc./Johnson & Johnson) for the treatment of chronic lymphocytic leukemia and mantle cell lymphoma. The drug is also being tested in an investigator-sponsored study in combination with paclitaxel in breast cancer patients.

ROR1 binds WNT5A, eventually promoting tumor growth through Rac1 and metastasis through RhoA.

Oncternal is also developing TK-216, an inhibitor of E26 transformation-specific (ETS) transcription factor. The drug is being tested in a phase I study in patients with Ewing sarcoma, which is caused by genetic mutations that lead to a chimeric ETS protein. The company also plans to study the drug in other cancers where ETS-family proteins are overexpressed, including acute myeloid leukemia, aggressive lymphoma and prostate cancer.

Oncternal also has a preclinical CAR T program that targets ROR1. Since ROR1 promotes survival of tumor cells, Oncternal believes patients will be less likely to experience ROR1 negative relapses.

The new company expects to have approximately $26 million in the bank when the deal closes, which is expected in the second quarter of this year. Oncternal estimates that would be enough to fund the company into the second quarter of 2020, allowing it time to produce some data for cirmtuzumab and TK-216 as well as perform IND-enabling studies for the lead candidate from Gtx's SARD program.

Of course, companies usually don't want to run their coffers that close to empty, so Breitmeyer hinted the company would likely raise additional capital in the second half of 2019.