Updated from 11:24 a.m. EDT

Genta

(GNTA)

said Monday that it is pushing back the development timeline of its experimental cancer drug Genasense in order to add more patients to its ongoing clinical trials.

The biotech firm also said it raised $72 million in gross proceeds from its development partner, the Franco-German pharmaceutical firm

Aventis

(AVE)

. Genta's chief financial officer, Al Fernandez, has also resigned to "pursue personal objectives," according to CEO Ray Warrell. A replacement is being sought.

Genta shares fell $1.48, or 16%, to $7.75 in recent Monday trading. An analyst from UBS Warburg downgraded Genta to hold from buy, while ThinkEquity Partners downgraded the stock to buy from strong buy. Neither firm has a banking relationship with Genta.

In May, TheStreet.com

reported that Genta was still enrolling patients in all three of its Phase III clinical trials for Genasense, which would likely delay the reporting of results and push back efforts to get the drug reviewed by the Food and Drug Administration.

On Monday Warrell said the company, after consulting with Aventis, has decided to increase the number of patients in its Phase III malignant melanoma study to 750 from 450. As a result, Genasense won't be submitted to the FDA before the middle of 2003, instead of the end of 2002, as previously expected.

Warrell, speaking on a conference call, added that patient counts in two ongoing Phase III studies testing Genasense in two blood cancers -- multiple myeloma and chronic lymphocytic leukemia -- will also likely be increased, but no final decision has been made. Data from these trials was expected at a medical meeting in December, but will now be delayed to a future undetermined date.

Warrell insisted that the trial resizing was done at the request of partner Aventis, which is asking Genta to take a more conservative, go-slow approach with Genasense's development to avoid the costly missteps made by other biotech firms recently. The addition of more patients, and the drug's delayed timeline, in no way hints at anticipated poor results from the three late-stage trials, he added.

Critics, of course, will take issue with this assertion. This is the

second time Genta has added patients to the melanoma trial, which like all the studies is not blinded. That means doctors know which patients are receiving a combination of Genasense and chemotherapy, and which are just receiving chemotherapy. Adding patients to an ongoing clinical trial -- not once, but twice -- raises a major red flag about Genasense's efficacy.

ThinkEquity biotech analyst Jessica Greenstein, in her downgrade note this morning, believes Genta's best shot at getting Genasense filed with the FDA will be with data from the melanoma trial. But the filing won't come before the end of 2003 or early 2004, which implies an FDA decision in late 2004 or early 2005.

"While news of a likely delay in the NDA filing of Genasense is quite disappointing, we continue to believe that the drug is working in patients, and we continue to believe that Genasense will ultimately receive FDA approval," Greenstein wrote.

But for this to happen in the near term, Genta will have to prove that a combination of Genasense and chemotherapy is producing a statistically significant survival benefit in melanoma patients, compared to patients who get chemotherapy alone. Adding 300 patients to the trial at this late stage certainly implies that Genta, so far, hasn't been able to produce the results it needs. It's also still not known whether the FDA will sign off on the latest change to the study.

The company's singular focus on its melanoma trial also implies that it is less confident in achieving positive results from its two blood cancer studies. Previously, Genta has marketed itself as one of the best investment opportunities in biotech because of its "three shots on goal" strategy of getting Genasense approved.

If Genta can't get Genasense approved on the basis of its ongoing clinical trials, it will have to wait for results from studies still in the planning stages -- results of which won't likely be ready for at least two years.

Aventis and Genta plan to conduct large, Phase III studies in breast and prostate cancer, among others -- trials that may enroll as many as 1,000 patients. Monday, Warrell said planning for these trials is under way, but there is no set timetable for when the trials will begin enrolling patients.

The increased uncertainty over Genasense is clearly spooking investors. Genta has now lost almost 60% of its market value since hitting a 52-week high of $18.49 per share in late August. The selloff has been accelerated, of course, by the moribund biotech sector as a whole.

But investors' concerns with Genasense are overshadowing good news on Genta's improved cash position. Monday, the company said it sold approximately 6.7 million shares of its stock to Aventis, raising $72 million in gross proceeds. Aventis now owns just under 10% of Genta's outstanding voting shares. Aventis' equity investment in Genta was part of the agreement signed between the two companies in April.

Genta now has $165 million in cash on hand, the best cash position in the company's history, according to Warrell.

But the sharp drop in Genta's share price has forced Aventis to take a larger ownership stake in the biotech company -- just over 1 million shares more than previously planned. Genta was trading near $13 per share when Aventis inked its deal on April 29.