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Genta Down 16% After Announcing Delayed Drug Filing
DOW JONES NEWSWIRES
By Daniel Rosenberg
Of DOW JONES NEWSWIRESCHICAGO -- Biopharmaceutical company Genta Inc.'s (GNTA) shares fell more than 15% early Monday after the company said it would delay by six months its filing for approval of cancer drug Genasense.
"It was an easy call to make," said Genta Chairman and Chief Executive Raymond Warrell in a telephone interview with Dow Jones Newswires. "It's the right thing to do."
He said adding 300 new patients to the 450-patient trial of Genasense for skin cancer patients would "maximize the opportunity and minimize the risk."
Genta is testing Genasense for its efficacy in patients with skin cancer, blood cancer and chronic leukemia. Genasense has the potential to improve cancer treatments by blocking the production of protein cells that prevent cancer cells from being killed during chemotherapy.
Recently, the French-German drug maker Aventis SA (AVE) negotiated an agreement that gives Aventis the marketing rights to Genasense. Under the deal, Genta will receive up to $480 million in cash, equity, milestones and convertible debt from Aventis. The total value of the development and marketing partnership could be worth $870 million or more.
It was at the urging of Aventis that Genta decided to delay filing for Genasense. Originally, it had intended to file by the end of this year, said Mark Monane, analyst with Needham & Co.
"They will add 300 patients to the melanoma (skin cancer) trial," said Monane, who rates Genta a strong buy, but doesn't own any shares. "In statistics, the more patients you have the better. With extra money from Aventis, Genta's cash position is solid, and Aventis suggested that they slow development."
From a short-term perspective, that's negative news, Monane said. But longer term, he's quite bullish about the prospects for Genasense, and believes Genta is a good choice for patient investors.
Genta also announced Monday it had received $72 million gross proceeds from Aventis as part of the companies' collaboration.
"This eliminates any financial uncertainty for the company," Warrell said.
Recently, shares of Genta changed hands at $7.96, down $1.29 or 13.95%. Earlier, shares plummeted to a 52-week low of $7.48. Monday's volume of 3.27 million shares compares with an average daily volume of 1.5 million.
Aventis suggested that Genta add new patients and extend the trial in order to improve chances of success, Genta CEO Warrell said. Aventis wanted to get more detail from the trial than Genta could have initially with its smaller resources.
This seemed like a very good idea, Warrell said, because the Food and Drug Administration has been demanding of late.
"They're getting stricter," he said. "We have the money (to add patients) and we don't have to take higher risks."
He pointed out that other small biotech companies using particularly aggressive approaches in their trials haven't had much success with the FDA. The revised time schedule and additional patients, most of which will be funded by Aventis with its huge resources, gives Genta the luxury of taking a more conservative tack.
The trial should be completed this year, but Genta wants to conduct six months of follow-up to check survival rates before it files. Patients participating in the trial had an average survival prediction of about six months.
"I'd like to see a statistically significant improvement of four to six to eight weeks," Warrell said.
Analyst Monane, who has a target range of between $26 and $28 on Genta stock, said the company is on the right track in focusing on melanoma for its New Drug Application (NDA). Though no company will make a fortune treating melanoma, there is an urgent need for new therapy.
"There are no really good drugs for it, and it's a fast-growing cancer," Monane said. "(Sen.) John McCain had it and it's definitely going up. If this drug is effective and they file it in the second half of 2003, then for the long-term, this is a good story."
He said the company's other cancer trials "are moving nicely."
Though Warrell emphasized the importance of taking a slower, more methodical approach with the melanoma trial, investors showed little sign of patience with the company after its announcement. Shares of Genta, which traded above $18 as recently as late March, continued to be caught up in the general biotech sector weakness.
Warrell admitted he's frustrated by the market, especially in light of the agreement with Aventis.
"This should have been a sector-transforming deal," Warrell said. "It's the first big deal in the wake of the ImClone disaster, and it shows that big drug companies are still willing to invest (in biotech) and sign a gigantic check. But it fell completely flat."
Warrell was referring to ImClone Systems Inc.'s (IMCL) $2 billion pact with Bristol-Myers Squibb Co. (BMY) that gave Bristol-Myers the right to market ImClone's Erbitux cancer drug in the U.S. The FDA refused last year to evaluate the drug based on questions about data submitted in ImClone's application. Bristol-Myers was stunned by the questions raised by the FDA and demanded that ImClone's CEO resign. The CEO, Samuel Waksal, refused initially, but resigned last week.
Biotech has struggled all year. The AMEX Biotechnology Index recently was down $8.06 at $396.98, or about 2%. Since Dec. 31, the index is down nearly 32%.
"It's a horrible, horrible bear market," Warrell said. "Everyone is skeptical of everything. This (deal with Aventis) will be recognized eventually."
-By Daniel Rosenberg, Dow Jones Newswires; 312-750-4118; daniel.rosenberg@dowjones.com
Updated June 3, 2002 12:25 p.m. EDT |
