Genta's setback shows risk of market
Biotech plans revival after its FDA failure
Sunday, May 09, 2004
BY SUSAN TODD
Star-Ledger Staff
Genta's ambition of making it into the biotechnology big leagues always hinged on the success of a cancer drug called Genasense.
The small biotech company, tucked inside a grassy office park in Berkeley Heights, spent the past nine years and hundreds of millions of dollars developing the drug.
Then it all went awry.
Last week, Genta's calculated plan to sell Genasense as a treatment for skin cancer was foiled. A panel of experts, responsible for advising the Food and Drug Administration, identified problems with the research data Genta presented to prove the effectiveness of its drug. The panel's findings, while not the last word, are weighed heavily by regulators who are expected to render a decision next month.
"It's a setback every which way you look at it," said Reni Benjamin, an analyst with Rodman and Renshaw in New York City.
Welcome to biotech, a business littered with stories of monumental setbacks -- and, often, surprising comebacks.
The most famous might be the tale of Erbitux.
After a dramatic failure at the FDA, ImClone and its partner Bristol-Myers Squibb moved through two years of scandal, lawsuits and cynicism to secure regulatory approval for Erbitux in February.
The story of Genasense may not be quite so long -- or nearly as controversial. But it provides another illustration of the high risks involved in making drugs and getting them to market. As one Wall Street banker observed last week in the wake of Genta's stumble, "One of the reasons biotech is so volatile is because it's not easy."
FDA documents hinting at Genta's troubles on April 30 sent the company's stock plummeting as much as 40 percent in a huge sell-off. Investors have remained edgy about the company's prospects. In all, nearly $800 million of Genta's market value has been lost.
For now, Genta will have to focus on reviving the credibility of its drug, according to analysts. More data showing how Genasense treats skin cancer may accomplish that. Or it may take evidence of the drug's effectiveness in treating other forms of cancer, such as multiple myeloma or leukemia.
Genta, which has 155 employees and remains unprofitable, never hung all its hope on getting Genasense approved for a single disease. As part of its business strategy, it pursued studies on the drug as a treatment for skin cancer and the two blood cancers, multiple myeloma and chronic lymphocytic leukemia.
"No matter what the indication, the goal has to be to get Genasense approved for something and grow the business from there," said Brian Rye, an analyst with Janney Montgomery Scott in Philadelphia.
Raymond Warrell Jr., Genta's chief executive, declined to answer questions about the company's strategy last week. In a conference call with Wall Street analysts on Wednesday, however, he expressed an intent to "work our way through" the setback.
"We are disappointed," he said, reading from a prepared statement, "but we are continuing to develop Genasense with the ultimate objective of obtaining marketing approval."
Genta's stumble resulted from flaws in the structure of its clinical studies, the rigorous tests of the drug in humans, and unconvincing statistical data, which left the FDA's panel of experts doubtful about whether the drug would benefit patients.
The experts weighed the toxicity of the drug -- a potent injectible pumped into the patient's blood from a fanny pack-like device over five days -- against its ability to stop the progression of skin cancer and to help patients live longer.
But the panel's review of Genasense attracted the attention of the biotech industry for a another reason. It was the FDA's first review of a biologic cancer medicine since Mark McClellan's departure as commissioner, and it was widely considered to be a first look at how the agency would review cancer medicines going forward.
"This was the first test. It was a tipping point for biotech," David Miller, president of Biotech Monthly, a Seattle-based independent stock research company. "Biotech executives wanted to see how accommodative the FDA was going to be going forward.
"This was not a peer review. This was more like a trial."
The good news for Genasense is that regulators may not reject Genasense outright next month based on the panel's recommendation, Miller said. He predicted the drug may be approved with conditions.
The panel acknowledged skin cancer patients responded to treatments of the drug, but that didn't outweigh their problems with the structure of the clinical trials and the data they produced.
"People are living longer without the disease getting worse. You can't refute that from a clinical standpoint," Miller said.
But carrying out more studies to provide unequivocal statistical data will cost Genta both time and money. The company has $67 million in cash, enough to carry it through next year, Warrell told analysts last week. Genta's only drug, Ganite for cancer-related hypercalcemia, generated $1.4 million in revenues last year.
For now, Genta depends largely on the financial support of Aventis, the European pharmaceutical company that agreed to co-develop Genasense in 2002. Aventis has agreed to study the drug on lung, prostate and breast cancer this year.
Before the year is over, Genta also expects to present data from its studies on multiple myeloma and leukemia. Promising results from either study could change the company's strategy, pushing its focus on skin cancer to the back burner, according to analysts.
Genta's partnership with Aventis may rest more on the results of the two late-stage studies cancers than Sanofi-Synthelabo's proposed acquisition of Aventis, analysts said.
"If the other two studies fail, Aventis or Sanofi are going to rethink the deal. I don't think they will back out, but they may renegotiate the deal," Miller said.
The decision by Genta to study Genasense on several types of cancer at once could ultimately prove to be the silver lining in its fumbled approval of the drug.
"Given Monday's disappointment, not many investors are going to give Genta the benefit of the doubt until they actually see data that is positive and can support approval," said Rye, the Janney Montgomery Scott analyst.
Warrell, who was a prominent oncologist before he moved into biotech to try to make more of an effect in fighting the disease, isn't likely to give up, analysts said.
"My impression is he's gone through thick and thin, and I think he wants to see it through," Benjamin said.
"He came so close to the goal line and didn't make it because the trial design wasn't just right. I think he still sees the goal line," Benjamin said. "One way or another, the drug will come to market."
Susan Todd can be reached at stodd@starledger.com or (973) 392-4125 |
