Updated from 3:38 p.m. EST




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 ofGenasense, testing the drug's effectiveness in patients suffering frommelanoma and two types of blood cancer -- multiple myeloma and chroniclymphocytic leukemia.

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

In Genasense's case, it is designed to stop the production of a proteinknown as Bcl-2, which Genta believes makes cancer cells resistant tochemotherapy drugs. Genta is testing Genasense as a "chemotherapysensitizer," which means that Genasense reduces the level of Bcl-2 incancer cells, making them vulnerable to the killing properties of existingchemo drugs.

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

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

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

Genta's critics believe that the only reason for adding more patientsto 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 whodon't. Increasing patient enrollment essentially retools the trial andgives the drug more chances to produce a statistically significant positiveresult.

From the beginning, Genta has declined to discuss with investors oranalysts patient enrollment issues related to its clinical trials. Companyspokeswoman Tara Spiess, while not wanting to confirm any of the recentscuttlebutt, did strongly refute the aforementioned bear case on Genasense.

Adding patients to the trial "would only be a negative if you thoughtit would delay the release of test results or ultimately the launch of ourproduct," she says. "But there is no delay, and if there was, we would makean 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'


debacle, not to mention the general mood of distrust of corporate management that has come out of the



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