Staff Writer

Although Genta Inc. has been plagued by clinical holds and corporate cutbacks, it appears that the Berkeley Heights, N.J.-based company has finally turned a corner.

After recently releasing positive Phase III follow-up data for its lead product, Genasense, in chronic lymphocytic leukemia (CLL) and positive interim Phase I/II data for the drug in melanoma, the company strengthened its fiscal footing and portfolio with a $40 million convertible financing deal. Genta will close on $20 million today, and could be eligible for an additional $20 million in gross proceeds in a year.

As part of those efforts, Genta has entered into an agreement with investors to place senior secured convertible notes, which will be due in 2010. The notes will bear interest at an annual rate of 15 percent, payable at quarterly intervals in stock or cash at the company's option. In addition, the notes will be convertible into shares of Genta common stock at a conversion rate of 100,000 shares of common stock for every $1,000 of principal.

Genta Chairman and CEO Raymond P. Warrell Jr., told BioWorld Today that the financing will take place in two tranches. And while the first $20 million in notes will be issued upon initial closing of the transaction, holders of the notes will have the right, but not the obligation, for the two months following the initial closing, to purchase an additional $20 million in notes.

But more importantly, Warrell said, the timeline of the funding gives the company time to get Genasense to market. "There's a 12-month period of time to pull in the second half of that financing, and the second half would run for an extended period of time beyond that, which would strongly contribute to both approval of Genasense in melanoma as well as the product's commercial launch," he said.

Warrell said the agreement would be essential to the success of commercialization efforts for Genasense. "This is a very important deal for us because it ensures that we're going to be able to finish our ongoing Phase III trial with Genasense in melanoma," he said.

The funding complements what Warrell claimed is some of the most robust data in the field. "We have the best overall efficacy data from the largest ever randomized trial that has ever been conducted in Stage 4 malignant melanoma, in 771 patients. These are highly robust and very reliable results on which to build our ongoing trial."

The trial, called AGENDA, is a smaller trial in patients with a specific biomarker. "About one-third of those patients are currently enrolled in that trial," Warrell said, "and we will finish enrollment before the end of the current calendar year." He expects interim data on one of the study's primary endpoints by the first quarter of 2009. "Hopefully, they will be sufficiently robust as to allow us to begin a rolling NDA submission to FDA in that quarter," Warrell said.

He said the new trial results will support advancement of its clinical programs in the two promising indications. "Genasense has been our lead program for several years. But because the technology is so new and the target has been previously unvalidated, that has added a lot of risk to the programs that we've undertaken so far. The good news is that we have strong evidence of efficacy in both melanoma as well as CLL, and we are very aggressively pursuing those two as our lead indications for Genasense," Warrell said.

In late 2006, the FDA rejected the company's new drug application for Genasense Injection for treatment of patients with relapsed or refractory CLL. The drug met its endpoint in a Phase III trial, but reviewers claimed the drug's benefit wasn't substantial enough. Genta appealed, and in March, the FDA recommended it conduct further clinical trials or provide new analyses of existing trials to support the efficacy in its new drug application. (See BioWorld Today, March 20, 2008.)

In April, Genta cut 30 percent of its staff, and was notified May 6 that it failed to meet the requirements necessary to remain listed on Nasdaq. As a result, Genta now is listed on the Over the Counter Bulletin Board. It also placed its only marketed product, Ganite, on the market.

As Warrell noted, "Our financial situation had become such that the ability to become successful in completing these trials had become an open question." But he sees potential in the deal to turn things around. "I think this agreement is transforming for us because it now indicates that we have the leading program in malignant melanoma," he said. "It also allows us to finish up and pursue some additional programs in CLL with Genasense. It also will allow us to advance a strong pipeline of oncology products," he added.

Genta counts tesetaxel, an oral taxane, among the other products in its portfolio, but it is on a clinical hold with the FDA. Still, the company is hopeful the hold will be lifted. "We're very focused on partnering tesetaxel, and those discussions are very important," Warrell said.

In other financings news:

• American Oriental Bioengineering Inc., of New York, said it withdrew its convertible preferred stock offering due to prevailing market conditions. The company had planned to raise about $125 million.

• Creabilis Therapeutics SpA, of Ivrea, Italy, raised a total of €20 million (US$31.1 million) in a Series A financing. The round was led by Sofinnova Partners, which was joined by NeoMed Management. The funding will be used to finance three Phase II trials of Creabilis' most advanced products: CT327, which is being developed for the treatment of psoriasis and dermatitis, and CT200, which is being developed for Behcet's disease. In addition, Creabilis will advance its pipeline of preclinical dermatology drug candidates.

• Exelixis Inc., of South San Francisco, entered into an agreement with Deerfield Management, to provide up to $150 million in financing through a flexible credit facility. The funds can be drawn at any time over the next 18 months at Exelixis' discretion. Funds drawn will be repayable in five years and can be repaid in shares of Exelixis common stock or cash. Exelixis will pay a quarterly commitment fee at a rate of 2.25 percent per year, and amounts drawn will accrue interest until maturity at a rate of 6.75 percent per year. Deerfield was issued warrants to acquire 1 million shares of Exelixis common stock at an exercise price of $7.40 per share. In the event that Exelixis draws on the facility agreement, Exelixis would be required to issue warrants to acquire up to an additional 10,000,000 shares of its common stock. Shares of Exelixis (NASDAQ:EXEL) were up 34 cents Thursday, to close at $6.50.

• Novelix Pharmaceuticals Inc., of La Jolla, Calif., closed a Series A-3 preferred stock financing. The funds will allow the company to expand its team following its relocation from Pasadena to La Jolla.