Genta's Crucial Pact with Aventis
To Genta (GNTA ), a small biotech that focuses on cancer therapy, the pact it signed with French drugmaker Aventis on Apr. 29 was a big deal. But its stock hardly budged, because of the market slump and weak biotech sector. It rose from 11.72 to just 12.78 on the news. On May 1, the stock climbed a bit more, to 13.41--still way off its 52-week high of 18.49, which it hit in late March.
But to Mark Monane of investment firm Needham, who rated Genta a strong buy even before the deal, the stock's slow reaction presents a chance to buy Genta at reasonable levels. Monane, who doesn't own Genta shares, has a 12-month price target of 28 a share. Here's why: Genta and Aventis will jointly develop and market Genasense, Genta's flagship anticancer drug now in clinical trials, scheduled to be completed by summer. Genasense has demonstrated that it can block the production of certain protein cells that prevents chemotherapy from killing cancer cells. Aventis will give Genta up to $480 million in cash plus achievement-milestone fees. CEO Ray Warrell says Aventis also bought $75 million worth of stock, or 7%. With the cash infusion, Genta should be ready to file for Food & Drug Administration approval by yearend 2002 and can launch Genasense commercially by mid-2003, says Monane. An O.K. from the FDA isn't guaranteed, but if all goes as planned, Monane sees Genasense peak sales of up to $750 million by 2007. He expects Genta to be in the black in 2004.
By Gene G. Marcial