This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Questions Arise as Genta Expands Cancer Drug Trial

Updated from 3:38 p.m. EST

Is Genta (GNTA) running into trouble with its highly anticipated cancer drug Genasense?

That's the buzz making its way around Wall Street trading rooms over the last week, as word leaked out that the biotech company increased the number of patients in a pivotal, late-stage clinical trial testing Genasense in patients with skin cancer, or melanoma. The buzz turned negative Thursday afternoon, when the company refused to discuss the issue during a conference call.

The implications of this resizing -- confirmed by several sources familiar with the trial -- are not clear. Adding patients to a clinical trial in progress can be a red flag, warning of negative results. But it's just as possible that there's nothing wrong whatsoever, and in fact, increasing patient enrollment could be an early tip-off that Genasense is working well.

Company officials have so far refused to talk directly to the issue, and that has only added to the mystery. Genta shares fell about 16% on Tuesday and Wednesday as Wall Street biotech traders swapped theories -- mostly negative -- about what was going on with the Genasense study.

Thursday morning, Thomas Weisel Partners biotech analyst Patrick Mooney released a note defending Genta, stating that patients have been added to the melanoma trial, but that this was preplanned, approved by the Food and Drug Administration and is a likely positive. (Mooney rates Genta strong buy, and his firm makes a market in the company's stock.)

But Genta shares fell sharply lower Thursday afternoon after CEO Ray Warrell refused to answer multiple questions about the trial re-sizing on a conference call sponsored by UBS Warburg. The issue dominated the hour-long call, and the lack of a clear answer clearly spooked investors. Genta closed down $2.61, 16.5% to $13.20.

Genta is currently conducting three late-stage clinical trials of Genasense, testing the drug's effectiveness in patients suffering from melanoma and two types of blood cancer -- multiple myeloma and chronic lymphocytic leukemia.

Genasense has been at the center of a lot of controversy because it relies on an as-yet-unproven cancer-fighting technology called antisense. These kinds of drugs are actually snippets of genetic code that work by infiltrating cells and preventing the expression of certain harmful proteins.

In Genasense's case, it is designed to stop the production of a protein known as Bcl-2, which Genta believes makes cancer cells resistant to chemotherapy drugs. Genta is testing Genasense as a "chemotherapy sensitizer," which means that Genasense reduces the level of Bcl-2 in cancer cells, making them vulnerable to the killing properties of existing chemo drugs.

Of course, all this is theory and won't be proven definitively until Genta completes its three late-stage clinical trials. Earlier studies of Genasense's efficacy have produced mixed results. If Genta can achieve positive results in one of these trials -- results are expected by this summer -- the company plans to file for regulatory approval with the FDA.

That's why Genta's decision to add more patients to its melanoma trial is drawing so much interest from Wall Street biotech analysts and traders. The randomized, but unblinded, study began with 270 patients -- half of whom are being given Genasense plus the chemo drug dacarbazine, and the other half receiving just dacarbazine. To succeed, the trial must show with statistical significance that patients in the Genasense arm survive 50% longer than those in the control arm.

But it is widely believed that Genta has enrolled at least another 110 patients -- possibly many more -- in the melanoma trial, according to sources familiar with the study. What's the significance of this? It depends on whom you ask.

Genta's critics believe that the only reason for adding more patients to the study at this point is because Genasense is not working well enough. Patients who are taking the drug are not living longer than those who don't. Increasing patient enrollment essentially retools the trial and gives the drug more chances to produce a statistically significant positive result.

From the beginning, Genta has declined to discuss with investors or analysts patient enrollment issues related to its clinical trials. Company spokeswoman Tara Spiess, while not wanting to confirm any of the recent scuttlebutt, did strongly refute the aforementioned bear case on Genasense.

Adding patients to the trial "would only be a negative if you thought it would delay the release of test results or ultimately the launch of our product," she says. "But there is no delay, and if there was, we would make an announcement."

On the UBS Warburg conference call, CEO Warrell didn't say much more when asked repeatedly by fund managers to confirm or explain why patients were added to the melanoma trial. One fund manager on the call brought up the fact that other biotech firms, faced with the need to add patients to studies, have considered it a material event and issued press releases.

But Warrell wouldn't budge.

"From the beginning, we have never provided updates on patient accrual, enrollment rates or study amendments for any of our trials," he said. "We want to stick to that policy so we're not going to make any direct comments on these issues."

Instead, Warrell insisted that investors should focus on the fact that the company has not changed any of its guidance in terms of when results from the clinical trials will be ready, or when a FDA filing will be ready.

But Genta's "trust us" strategy could be problematic, especially in an era when biotech investors have already been hurt badly by the ImClone Systems' (IMCL) debacle, not to mention the general mood of distrust of corporate management that has come out of the Enron saga.

The steep drop in Genta's stock immediately after the conference call clearly suggests that investors want more, not less, information on Genasense.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,240.98 +84.13 0.49%
S&P 500 2,009.17 +7.60 0.38%
NASDAQ 4,584.6250 +22.4360 0.49%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs