Genta

(GNTA)

acknowledged Friday that it did increase the number of patients in a key late-stage clinical trial of its cancer drug Genasense, but that the retooling of the study would not have a negative impact on results.

Shares of Genta fell 16% Thursday after company executives

refused to answer questions from institutional investors about whether the company added patients to a clinical trial testing Genasense in patients suffering from skin cancer, or malignant melanoma.

On Friday, the company reversed course. During a premarket conference call, CEO Ray Warrell said that last summer the decision was made to expand the trial size from 270 patients to 450 patients. But more importantly, Warrell emphasized that the resizing of the trial was preplanned and approved by the Food and Drug Administration, and that he still expects to be able to release preliminary results this summer.

"There is no new news to report," he said, adding that the impact of adding more patients "will be a wash or slightly positive."

Shares of Genta were up $1.11, or 8.4%, to $14.31 in recent trading.

The melanoma trial, started in mid-2000, is randomized but unblinded. Half of the patients in the study are being given Genasense plus the chemo drug dacarbazine, and the other half are 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.

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

Warrell took issue with this view Friday, stating that Genta has not performed any type of preliminary analysis of the trial's results that would have given it an early clue that Genasense wasn't working. Instead, more patients were added only because the company wanted to increase the trial's sample size, which from a statistical level, is more likely to produce positive results.

"I think this is a positive," says Stephens biotech analyst Jason Zhang. "It looks like the decision to add patients was made a long time ago and was not based on any kind of interim analysis." Zhang rates Genta buy, and his firm doesn't have a banking relationship with the company.

But one hedge fund manager, who is short Genta, is still not entirely satisfied with the company's response. "The company has admitted that it increased the trial size, but it won't say whether patient enrollment is complete, and to me, that's the more important issue. If enrollment is still not finished, I don't see how the company can expect to have results by this summer."

Both on the conference call this morning and on one Thursday, Genta executives insisted that there was no change to its timelines. Results from one of three late-stage clinical trials of Genasense will be released this summer. If the results are positive, Genta expects to seek Genasense approval from the FDA by the end of the year.