West Coast Editor

Coming off a roller coaster ride with its lead antisense compound, Genta Inc. treated itself to a figurative bale of cotton candy, in the form of an agreement for the sale of 15 million shares of stock at $1.50 per share for gross proceeds of $22.5 million - although some shareholders might not have found the discount or dilution so sweet.

The Berkeley Heights, N.J.-based firm's stock (NASDAQ:GNTA) closed Wednesday at $1.77, down 8 cents, after falling as low as $1.63.

"They needed to raise money or they weren't going to be able to go on," said Jason Napodano, senior biotechnology analyst with Zack's Independent Research in Chicago, crediting the 35-cent discount to Tuesday's closing price for the success in raising money.

Napodano said he had the dilution "baked into my model - I assumed they would issue 15 to 20 million shares."

Better-than-expected data disclosed last week at the American Society of Hematology (ASH) meeting in San Diego from trials with Genta's antisense drug, Genasense, against chronic lymphocytic leukemia (CLL) sent the firm's stock up about 50 percent to close at $2.05. Those were the same mixed data that caused partner Aventis, of the Paris-based Sanofi-Aventis Group, to back out of the potential $476.9 million CLL deal. (See BioWorld Today, Dec. 7, 2004.)

"That was the point when I might have said, OK, forget it,'" Napodano said. "I believed in the drug back when [Aventis] was interested, but when [Genta] lost them, they lost a lot of clout."

Though investors seemed enthused about the ASH results, Napodano said the data show Genasense's worthiness against CLL is "still kind of a question mark," and called accelerated approval of the drug "a long shot, but it may be a shot worth taking."

The drug has failed against multiple myeloma and melanoma.

"I don't know who bought it or what their plans are with it, but the stock will probably have a pop when Genta files in the first quarter [for approval of Genasense in CLL]," Napodano told BioWorld Today. "That might be the time to sell, because it's 50-50 at best" that the compound will win the FDA's nod, he added.

His price target is $1.50.

"I can't update the stock every day because it's so volatile, so I just said $1.50," Napodano said.

The leading drug in Genta's small-molecule program is Ganite (gallium nitrate), an injected compound for cancer-related hypercalcemia that is resistant to hydration.

"Sales of that are kind of in the tubes," he said.

Rodman & Renshaw LLC, of New York, acted as placement agent for the deal with two institutional investors. The sale is pursuant to a registration statement declared effective by the SEC in May, which said proceeds will be used for research and development, commercialization, and various other expenses.