Health Check: Syntara shares plunge on FDA ‘do more trial homework’ edict

• Syntara shares tumble almost 50% after the FDA ‘suggests’ another trial
• Avita Medical looks to raise capital after a disappointing quarter
• EBR Systems is on track for limited US launch of its novel heart pacing device

Shares in cancer drug developer Syntara (ASX:SNT) this morning lost almost half their value, after unfavourable advice from the US Food & Drug Administration (FDA).

The agency has advised the company to do a placebo-controlled phase II trial, before proceeding with a proposed pivotal study for myelofibrosis.

As any drug developer would attest, it’s always a good idea to take the agency’s counsel on board.

The FDA wants a placebo-controlled trial to glean “additional safety and efficacy data”.

Syntara says the trial should focus on improvements in symptoms and spleen volume reductions, “in order to optimise the design and efficiency of a subsequent pivotal phase III trial”.

Agency takes “conservative” approach

CEO Gary Phillips today told investors the company only heard the news on Saturday and was still digesting the implications.

“The FDA has taken a more conservative approach to get the drug to approval,” he says.

“It’s not the fast track we were looking for, but nonetheless their guidance is extremely helpful.”

In effect, the company can’t leapfrog to a planned phase II/III trial, enrolling up to 300 patients at a cost of around US$80 million.

The company now is likely to carry out a 90-patient phase 2b study, probably with 60 on active treatment and 30 on placebo.

Phillips estimates the cost “in order of US$25 million”, but the study would mean a subsequent phase III trial potentially could be smaller and cheaper.

The FDA’s stance does blow out the company’s time lines, given the phase II effort would take 12 to 18 months to recruit.

Ironically, the more circuitous path means lower short-term cash requirements: the company’s $15 million should  last into 2027, rather than mid 2026 as envisaged.

“The FDA has given us a different clinical path, but everything else around this asset remains the same,” Mr Phillips says.

Promising early results

The FDA mulled the interim data from Syntara’s ongoing phase 1c/2 trial, which tests Syntara’s amsulostat (SNT-5505) in combination with the standard-of-care ruxolitinib.

Results to date from the open-label study suggest amsulostat “may deliver deep and long-lasting benefit of patients who are sub optimally controlled by ruxolitinib alone”.

Syntara values the myelofibrosis market at US$1 billion a year.

Meanwhile, the company expects to release further results from the current open-label trial before the end of September.

Reimbursement ‘confusion’ crimps Avita’s sales

Friday’s poorer-than-expected June quarter result from Avita Medical (ASX:AVH) shows the burns and wounds care pioneer is lagging its revenue and earnings targets, with US reimbursement delays delaying sales from upgraded products.

Avita has commercialised Recell for thermal burn wounds and full-thickness skin defects. Unlike other treatments, Recell harnesses the patient’s own skin in a spray-on format.

In May 2024 the FDA approved Recell Go, which has enhanced features for clinicians.

The agency in December then approved Recell Go Mini, for smaller wounds of up to 480 square centimetres.

Missing expectations

In short, the US rollout has been slower than expected, partly because of reimbursement delays.

Bell Potter suggests this resulted from confusion over administration of these payments, which saw physicians not getting paid.

There’s no Hell like a doctor not being remunerated and they reverted to alternative therapies including skin grafts.

Avita posted June quarter revenue of US$18.2 million 20% higher year-on-year but flat on the March quarter tally. The numbers were around 16% below market expectations.

June half revenue gained 35% to US$36.5 million.

The company lost US$9.9 million in the quarter, compared with a US$15.39 deficit a year ago.

Management has trimmed calendar 2025 guidance to US$76-81 million, from the previously guided US$100-106 million. The tally is 19-27% higher year on year.

Balance sheet concerns

As of June 30, Avita had cash and equivalents of US$15.7 million. It also has a US$40 million debt facility, from specialist lender Orbimed Advisors.

The company has won a series of waivers its debt covenants, relating to minimum quarterly and annual revenue.

But Avita must continue to maintain a minimum US$10 million of cash.

In a ‘going concern’ note to the accounts, management says that  “absent any mitigating action, the company probably won’t be able to comply with a  minimum cash balance covenant within the next 12 months.

“The company is actively evaluating strategies to obtain the required additional funding for future operations. This includes an equity raising.”

Broker Morgans says “despite a significant shortfall in sales, Avita successfully rolled through cost-base reductions as planned, decreasing the net loss with more to come in [the September quarter].”

Nonetheless, “another missed guidance target is unlikely to reassure investors, and it is now evident that additional capital will be necessary to support the company to profitability.”

Rating the stock a ‘speculative buy’, Morgans forecasts a calendar 2025 loss of US$36.5 million, improving to a US$18.1 million deficit in 2026.

Avita then cracks a US$5.6 million profit in 2027.

Morgans assumes a US$50 million equity raising.

Bell Potter believes the administrative “confusion” resulted in a 20% drop in demand for Recell over the half – a “material circa $5 million in lost revenues over the top 10 accounts alone”.

The firm says Medicaid patients account for 70-75% of Recell volumes, “hence it is critical that the matter is resolved without further delay”.

Avita shares have tumbled close to 20% since Thursday’s close and have lost about two-third of their value since the start of the year.

EBR Systems readies US rollout

Following a pilot stage, EBR Systems (ASX:EBR) is on track to roll out its novel heart device in the US market in the December quarter.

In April the FDA approved WISE, the world’s first and only leadless pacing system for heart failure.

Addressing a Canaccord Genuity conference in Boston, EBR CEO John McCutcheon said the company would focus on “strategic” hospitals.

Crucially, in October EBR won reimbursement for both inpatient and outpatient settings, at up to US$63,300 per procedure.

EBR cites an “initial addressable market” in the US of US$3.6 billion.

In early June EBR announced its first commercial implants, at St David’s  Medical Centre in Texas and the Cleveland Clinic.