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Genta and ImClone: The Tortoise and the Hare
In the wake of ImClone's (NASDAQ: IMCL) troubled Erbitux FDA application, biotech companies are sure to be more careful about hyping their developmental drugs. ImClone did a poor job of managing the expectations of its investors. ImClone took the fastest and most risky path towards FDA approval, attempting to have Erbitux approved based on phase II data.
Like ImClone, much of Genta's (NASDAQ: GNTA) future is resting on whether its lead drug, Genasense, is approved by the FDA in the next two years. But Genta has taken the opposite approach to seeking regulatory approval. Like Erbitux, Genasense is an innovative therapeutic that has the potential to treat a broad variety of cancers. Both drugs work extremely well in combination with existing forms of chemotherapy, and both drugs have the potential to be blockbusters. Genasense is an antisense therapeutic that blocks production of the Bcl-2 protein, a protein that protects cells from apoptosis (programmed cell death). Many tumor cells make excess Bcl-2 in order to avoid apoptosis.
In contrast to zero phase III trials used by ImClone prior to regulatory submission, Genta is currently conducting three phase III trials for malignant melanoma, multiple myeloma, and chronic lymphocytic leukemia (CLL). Genta has taken an extremely conservative approach to informing investors about Genasense trial progress. In contrast to ImClone's propensity to highlight even the smallest bit of positive trial data, Genta has kept quiet, asking investors to wait for the complete phase III data.
Genta's strategy is not without negative consequences. The lack of significant news about the progress of Genasense trials has invited some degree of speculation, often negative. This week, Genta's CEO Ray Warrell declined to explain why the company had enrolled more patients in the CLL phase III trial. Analysts feared that extra patients could mean that the trial wasn't going well, and this fear led to a 16.5% drop in Genta's stock price last Thursday. The reaction prompted Warrell to hold a conference call Friday morning. In the call, Warrell explained that the decision to add more patients had nothing to do with clinical results, and had in fact been made last summer before any clinical results were even known. Beyond this, Warrell stuck to the company's plan, giving no more indication, positive or negative, about the progress of the phase III trials.
Expect to see companies following the tortoise rather than the hare approach to developing drugs, at least in the near future. If Genasense is approved in 2003 or 2004, Genta's approach will be held up as an example of successful long-term strategy. Such conservatism will not always be
appropriate, but there is plenty of room in between the ImClone and Genta approaches for companies to seek speedy regulatory approval without taking undue risks.
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