Genta Inc. (OTCBB: GETA)

Genta Inc. (GETA) is a biopharmaceutical company engaged in pharmaceutical (drug) research and development. The Company focuses on the identification, development and commercialization of drugs for the treatment of cancer and related diseases. GETA’s research portfolio consists of two major programs: Deoxyribonucleic Acid (DNA)/Ribonucleic Acid (RNA) Medicines and Small Molecules. The DNA/RNA Medicines program includes drugs that are based on using modifications of either DNA or RNA as drugs that can be used to treat disease. This program includes technologies, such as antisense, decoys and small interfering or micro RNAs. GETA’s drug from this program is an investigational antisense compound known as Genasense (oblimersen sodium injection). The Small Molecules program includes drugs, such as Ganite and investigational compounds tesetaxel and G4544.

The Company was founded in 1988 and is based in Berkeley Heights, New Jersey.

Source: Reuters.com, SEC Filings.

Financial Summary

For the third quarter of 2009, the Company reported a net loss of $20.4 million or $(0.15) per share, compared with net income of $212.6 million, or $289.23 per basic share and $5.12 per diluted share, for the third quarter of 2008.  For the nine months ended September 30, 2009, the Company reported a net loss of $74.6 million, or $(0.98) per share, compared with a net loss of $535.4 million, or ($748.55) per share, for the nine months ended September 30, 2008.  All share and per share data included in this press release have been retroactively adjusted to account for the effect of a 1-for-50 reverse stock split for all periods presented prior to June 26, 2009.  Net product sales of $49,000 and $180,000 for the three and nine months ended September 30, 2009, declined from their comparison period figures of $115,000 and $363,000, respectively, due to the continued absence of promotional support.

Research and development expenses were $5.9 million for the third quarter of 2009, compared with $5.3 million for the third quarter of 2008. During 2009, with the establishment of the 2009 Stock Incentive Plan and implementation of two Equity Award Exchange programs, outstanding stock option awards granted under the 1998 Stock Incentive Plan, were exchanged for grants of new restricted stock units (RSUs). Incremental compensation cost for the new RSUs was measured as the excess of the fair value of the RSUs over the fair value of the stock option awards on the date of the exchange and the incremental compensation cost of the RSUs is being recognized over the remaining amortization period of the exchanged stock option awards. Share-based compensation expense recognized for the three months ended September 30, 2009, and 2008, was $2.9 million and $35 thousand, respectively, for those employees categorized as research and development. Partially offsetting this increase was lower expenses on the AGENDA clinical trial and lower payroll costs, resulting from lower headcount. Research and development expenses were $11.8 million for the nine months ended September 30, 2009, compared with $16.1 million for the nine months ended September 30, 2008. Share-based compensation expense recognized for the nine months ended September 30, 2009, and 2008 was $2.9 million and $0.1 million, respectively, for those employees categorized as research and development. The increase in share-based compensation expense was more than offset by lower expenses on the AGENDA clinical trial and lower payroll costs, resulting from lower headcount.

Selling, general and administrative expenses were $8.9 million for the third quarter of 2009, compared with $2.3 million for the third quarter of 2008. Share-based compensation expense recognized for the three months ended September 30, 2009, and 2008, was $6.6 million and $0.1 million, respectively. Selling, general and administrative expenses were $13.0 million for the nine months ended September 30, 2009, compared with $8.5 million for the prior-year period. Share-based compensation expense recognized for the nine months ended September 30, 2009, and 2008, was $6.7 million and $0.3 million, respectively. The increase in share-based compensation was partially offset by lower payroll costs and lower office rent of $0.8 million, resulting from the termination of a lease for one floor of office space in May 2008.

The Company issued convertible notes and warrants in June 2008 and in April 2009 and the Company issued shares of common stock, convertible notes and warrants in July 2009 and September 2009. These transactions resulted in the amortization of deferred financing costs and debt discount of $5.5 million and $3.6 million for the three months ended September 30, 2009, and 2008, respectively, and $22.4 million and $4.4 million for the nine months ended September 30, 2009, and 2008, respectively.

At the time of the financings in June 2008 and in April 2009, there were an insufficient number of authorized shares of common stock in order to permit conversion of all of the notes and warrants. Accordingly, the conversion obligation for the notes and warrants were classified as liabilities and measured at fair value on the balance sheet. The liabilities were then marked-to-market up until the dates that Company’s stockholders approved changes in the corporate structure, resulting in income of $224.4 million for the third quarter of 2008 and expense of $26.7 million and $502.8 million for the nine months ended September 30, 2009, and 2008, respectively.

At September 30, 2009, GETA had cash and cash equivalents totaling $7.4 million compared with $4.9 million at December 31, 2008. During the nine months of 2009, cash used in operating activities was $15.1 million compared with $22.0 million for the same period in 2008, reflecting the reduced size of the Company.

Source: Reuters.com, SEC Filings.

Analyst Consensus

No chart available.

Source: www.ft.com

No consensus analysis data available.

Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=GETA.OB

Investment Highlights

In mid February GETA announced that it has received $2.8 million in non-dilutive cash proceeds from the sale of net operating tax losses and research tax credits generated in prior tax years as part of the Technology Business Tax Certificate Program sponsored by the New Jersey Economic Development Authority (NJEDA), pursuant to the rules, regulations and stipulations set forth by the program.  This program, which focuses on biotechnology and other research-based companies, is designed to attract and retain knowledge-intensive businesses that will enhance the State’s strategic and competitive interests in these areas. GETA also announced that the Company’s request for designation as a Small-to-Medium Sized Enterprise (SME) had been granted by the European Medicines Agency (EMEA).  SME status provides certain financial and administrative assistance to small businesses as they advance their regulatory filings and submissions through the EMEA.

Also in mid February GETA announced that the Company has initiated treatment of the first subject in a new Phase 2 trial of tesetaxel in advanced melanoma.  Tesetaxel is the Company’s newest clinical-stage small molecule.  As a late Phase 2 oncology product, tesetaxel is the leading oral taxane currently in clinical development.  The new trial builds on more than ten years of GETA’s experience in melanoma clinical research.

Unlike standard taxanes (paclitaxel [Taxol®] or docetaxel [Taxotere®]) that must be infused intravenously, tesetaxel is a capsule that can be taken by mouth.  The study will examine the effects of tesetaxel in patients with advanced melanoma who have developed progressive disease after treatment with a single first-line regimen.  Endpoints of the study include response rate, durable response, disease control, progression-free survival and safety.  The study was initiated at M.D. Anderson Cancer Center in Houston, TX, which has been the lead center for GETA’s last two clinical trials in melanoma that together have enrolled approximately 1,100 patients.

Tesetaxel is a novel, orally absorbed, semi-synthetic taxane that is in the same class of drugs as paclitaxel and docetaxel.  However, both of these agents suffer from serious safety issues, particularly hypersensitivity reactions related to intravenous infusions that are occasionally fatal and that require careful premedication and observation.  Other prominent side-effects of this drug class include myelosuppression (low blood counts) and peripheral neuropathy (disabling nerve damage).

With administration as an oral capsule, tesetaxel was developed with a goal of maintaining the high antitumor activity of the taxane drug class while eliminating infusion reactions, reducing neuropathy, and increasing patient convenience.  The oral route also enables the development of novel schedules that may expand dosing options when tesetaxel is used alone or in combination with other anticancer drugs, including “all oral” chemotherapy programs.  Preclinically, tesetaxel has demonstrated substantially higher activity against cell lines that were resistant to paclitaxel and docetaxel, since acquired resistance is not mediated by the multidrug-resistant p-glycoprotein.

As a late Phase 2 oncology product, tesetaxel has demonstrated anticancer activity in its initial clinical trials, and the drug has not been associated with the severe infusion reactions that are linked with other taxanes.  Moreover, unlike other oral taxanes that have been developed, nerve damage has not been a prominent side effect of tesetaxel.  Thus, the drug offers substantial opportunities to improve patient convenience, safety and anticancer activity.  More than 280 patients worldwide have been treated with oral tesetaxel in Phase 1 and Phase 2 clinical trials.

Source: http://www.genta.com/

Technical Analysis

Source: http://stockcharts.com

GETA is trading above its 50-day moving average. While this is normally considered to be a bullish sign, the moving average is downward sloping which means that investors have been liquidating shares during this time period and tempers the bullishness of the signal.

GETA has been relatively stable recently. This is evidenced by the width of its Bollinger Bands, which are tighter than normal. Additionally, GETA is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

The MACD for GETA currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

Comparative Analysis

Source: Thomson Financial

Insider Trading Activity

Source: Yahoo Finance

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