This Day On The Street
Continue to site
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

Genta Believers Get Their Payday

Updated from 9:38 a.m. EDT

After more than two months of anxious anticipation, biotech firm Genta (GNTA) has finally inked a long-awaited partnership with French-German pharmaceutical firm Aventis (AVE) for its experimental cancer drug, Genasense.

Under terms of the deal, announced Monday, Aventis will pay up to $480 million in cash, equity, milestones and convertible debt to Genta. In exchange, Aventis and Genta will co-market Genasense in the U.S., while Aventis will have exclusive rights to the drug in the rest of the world.

Genta is currently running three, phase III clinical trials of Genasense in patients suffering from malignant melanoma, or skin cancer, and two blood-related cancers --- chronic lymphocytic leukemia and multiple myeloma. Results from the trials, which all test Genasense in combination with existing chemotherapy drugs, are expected this summer.

A deal for Genasense has been expected since February, when rumors started flying that Aventis was the suitor. Genta was up $2.26, or 19%, to $13.99 in recent trading, although that's off an earlier high of $16.40.

The somewhat muted response is likely being caused by a number of factors. The biotech sector, overall, is in a serious slump . Biotech investors have already been stung by overly optimistic Big Pharma-biotech deals that eventually went bad -- most notably the Bristol-Myers Squibb (BMY - Get Report) - ImClone Systems (IMCL) debacle. Lastly, Aventis has a mixed record with its biotech partnerships. Most recently, its collaboration with Viropharma (VPHM) and its treatment for the common cold blew up in March.

"This a good deal for Genta, but not fantastic," says Stephens biotech analyst Jason Zhang, adding that the deal gives Genta modest upfront payments but is fairly back-loaded, probably because Aventis is being careful not to make the same mistake as Bristol-Myers. Zhang rates Genta a buy and his firm doesn't do banking for the company.

Other terms of the deal call for Aventis to fund 75% of all future new drug application-development costs of the drug in the U.S., and 100% of the development, marketing and sales costs in the U.S. and elsewhere -- a figure estimated by Genta to approach $400 million over the next three years. Genta will receive undisclosed royalties on all worldwide sales of Genasense, which Genta CEO Ray Warrell described as being in the double-digit range.

But the bulk of Genta's rewards in new partnerships are contingent upon the company proving that Genasense works. The biotech firm will receive a total of $135 million in initial and near-term payments consisting of $10 million in cash as a licensing fee and $40 million in cash as development fees, $10 million on convertible debt and $75 million pursuant in an equity development after Genta achieves an undisclosed clinical milestone with Genasense.

Another $280 million in cash and $65 million in convertible notes will be paid by Aventis to Genta after the drug passes successfully through other key, but undisclosed milestones.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
VPHM $49.96 -0.02%
IMCL $0.14 23.09%
BMY $72.23 -0.04%
AAPL $93.75 -1.10%
FB $117.53 0.69%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs