PATRICK L. Rocco (PR 8621) JENNIFER A . SULLIVAN (JS 6957) . ;I ( I SHALOV STONE & BONNER LLP AT 163 MADISON AVENUE, P.O. Box 1277 WALSH MORRISTOwN, NEW JERSEY 07962-1277 (973) 775-8997
UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY ------X BONNIE ROST, individually and on behalf of all Case No. others similarly situated,
Plaintiff, CLASS ACTION COMPLAINT -against- FOR VIOLATIONS OF FEDERAL GENTA INC., RAYMOND P . WARRELL, JR. and SECURITIES LAW LORETTA M. ITRI
Defendants. JURY TRIAL DEMANDED
Plaintiff, by her attorneys, for her Class Action Complaint alleges :
NATURE OF THE CASE
1 . This is a Class Action brought on behalf of plaintiff and all other persons o r
entities, except for defendants, who purchased or otherwise acquired Genta Inc . ("Genta" or the
"Company") securities (the "Class") during the period September 10, 2003 through May 3, 2004 ,
inclusive (the "Class Period").
2 . This action, based on violations of section 10(b) of the Securities Exchange Ac t
of 1934 ("Exchange Act"), arises out of a series of false and misleading statements and omission s
of material fact by defendants regarding Genta's financial results. JURISDICTION AND VENU E
3 . This action arises under sections 10(b) and 20 (a) of the Exchange Act, 15 U.S.C.
§§ 78j(b) and 78t(a); and Rule I Ob-5 promulgated pursuant to section 10(b) by the Securities and
Exchange Commission, 17 C .P.R. § 240.10b-5 . The jurisdiction of this Court is based on section
27 of the Exchange Act, 15 U.S.C. § 78aa; and on sections 1331 and 1337(a) of the Judicial Code ,
28 U.S.C. §§ 1331, 1337(a) .
4. Venue is proper in this District under section 27 of the Exchange Act, 15 U.S.C .
§ 78aa, and section 1391(b) of the Judicial Code , 28 U.S .C . § 1391(b) . The corporate headquarters of Genta are located in this District .
5 . In connection with the acts and conduct alleged herein, defendants, directly an d indirectly, used the means and instrumentalities of interstate commerce, including the United State s mails and the facilities of the national securities exchanges .
PARTIES
6. Plaintiff Bonnie Rost, as set forth in the accomp anying certification, incorporated
by reference herein, purchased shares of Genta stock at artificially inflated prices during the Clas s
Period as set forth in the accompanying certification and has been damaged thereby.
7. Defendant Genta is a biopharmaceutical company dedicated to the identification,
development, and commercialization of novel drugs for cancer and related diseases. The Company' s
research portfolio consists of two areas of focus : deoxyribonucleic acid/ribonucleic aci d
("DNA/RNA") medicines, which are drugs based on chemical modifications of either DNA or RNA ,
and Small Molecules . The lead product from the Company's DNA/RNA Medicines program i s
2 Genasense, an antisense oligonucleotide molecule that is designed to block the production of a protein known as Bel-2.
8. Defendant Raymond P . Warrell, Jr., M.D ., has been the Company's Chief
Executive Officer since December 1999 and Chairman of the Board since January 200 1
9. Defendant Loretta M. Itri, M .D., has been the Company's President ,
Pharmaceutical Development and Chief Medical Officer since May 200 3
10. Defendants Warrell and Itri, are collectively referred to herein as the "Individua l
Defendants ."
11 . The Individual Defendants, by reason of their management positions and membership and ownership of the Company' s stock, were at all relevant times controlling person s of Genta within the meaning of section 20(a) of the Exchange Act . The Individual Defendants had the power and influence to cause Genta to engage in the unlawful acts and conduct alleged herein, and did exercise such power and influence.
PLAINTIFF'S CLASS ACTION ALLEGATIONS
12. Plaintiff brings this action as a class action pursuant to Federal Rule of Civi l
Procedure 23(a) and (b)(3) on behalf of the Class, consisting of all persons who purchased o r otherwise acquired Genta securities between September 10, 2003 through May 3, 2004, inclusive .
Excluded from the Class are defendants ; members of the immediate families ofthe Individual Defen-
dants ; any entity in which any defendant has or had a controlling interest ; and the legal
representatives , heirs, successors, or assigns of any defendant.
13. As ofMarch 11, 2004, more than 77 million shares of common stock of Gent a
were outstanding in an actively-traded and efficient market in which millions of shares were trade d
3 during the Class Period. Gents common stock is traded on the Nasdaq National Market under the symbol "GNTA." The members of the Class are so numerous that joinder of all members i s impracticable. While the exact number of Class members is unknown to plaintiff, and can only be ascertained through appropriate discovery, plaintiff believes that there are thousands of members o f the Class . Record owners and members of the Class may be identified from records maintained b y
Genta or its transfer agent and may be notified of the pendency of this action by mail, using the form of notice similar to that customarily used in securities class actions .
14. Plaintiffs claims are typical of the claims of the members of the Class in tha t plaintiff and each Class member purchased securities of Genta during the Class Period and sustaine d injury as a result.
15 . Plaintiff will fairly and adequately protect the interests of the members of the
Class and has retained counsel competent and experienced in class action and securities litigation.
16. A class action is superior to other available methods for the fair and efficient
adjudication of this controversy since joinder of all Class members is impracticable . Furthermore,
as the damages suffered by individual Class members may be relatively small, the expense an d
burden of individual litigation make it impossible for Class members to seek redress individually for
the wrongs done to them . There will be no difficulty in the management of this action as a clas s
action.
17. Common questions of law and fact exist as to all members of the Class and
predominate over any questions affecting solely individual members of the Class . Among the
questions of law and fact common to the Class:
4 (a) Whether the federal securities laws were violated by defendants' acts as allege d
herein;
(b) Whether defendants acted wilfully or recklessly in omitting to state an d
misrepresenting material facts; and
(c) Whether the members of the Class have sustained damages, and if so, what is th e
proper measure of damages .
BACKGROUND FACTS
18 . The Phase 3 trial for the use of Genasense in combination with dacarbazine for the treatment of advanced melanoma enrolled patients at 140 sites from 12 different counties . A total of 771 patients who had not been previously treated with chemotherapy were randomly assigne d to receive dacarbazine, a standard chemotherapy drug, alone or in combination with Genasense . The primary endpoint was to compare the overall survival between the two treatment arms . Secondary endpoints included comparative analyses of progression-free survival (PFS) and tumor respons e
(RR).
MATERIALLY FALSE AND MISLEADING STATEMENTS DURING THE CLASS PERIOD
19. On September 10, 2003, Genta announced the results of the Phase 3 clinical stud y of Genasense and submitted the first portion of the NDA to the FDA . In a press release on the PR
Newswire European, defendants announced the following results:
Analysis of all patients on an intent-to-treat (ITT) basis showed that the addition of Genasense to dacarbazine resulted in a median survival of 9 .1 months, compared with 7.9 months for patients treated with dacarbazine alone (P=0 .184). For patients treated per-protocol who have completed a minimum follow-up of 12 months (N=480), the addition of Genasense resulted in a median survival of 10.1 months, compared with 8 .1 months for dacarbazine alone (P=0 .035).
For the ITT population (n=771), patients treated with Genasense plus dacarbazine showed a significant increase in median progression-free survival to 78 days, compared with 49 days for patients treated with dacarbazine alone (P=0 .001).
For the ITT population (n+77 1), patients treated with Genasense plus dacarbazine achieved an antitumor response rate of 11 .7% (using RECIST criteria), compared with 6 .8% for patients treated with dacarbazine alone (P=0 .019) .
Defendants also stated that the "addition of Genasense to dacarbazine did not appear to be associate d with serious, previously unreported adverse reactions compared with the use of dacarbazine alone ."
Defendant Itri stated: "These results have been observed in a disease that is notoriously unresponsiv e to standard therapy and for which no drug has shown a survival advantage . We believe the current data support the NDA submission we have initiated using provisions granted under the `Fast Track ' designation for Genasense. "
20 . In a conference call on September 10, 2003 to discuss the Phase 3 clinical result s of Genasense for advanced melanoma, defendant Warrell answered the following questions by Eri c
Indy, a Merrill Lynch analyst:
Eric Indy: OK. And then, with respect to the adverse events, you said that there was nothing that had not been previously reported . Can you talk about those that had not been - or that had been previously reported , just so I understand what the safety profile of the product is?
Raymond P. Warrell: Yes.The safety profile is characterized by certain kinds of common reactions. The most common is a low grade fever. That usually appears in the first and second day and then goes away, really, without any therapy. No one, to my knowledge, has ever had to drop out of the program due to fever .
6 21 . The NDA was completed on December 8, 2003 and on February 6, 2004, Gent a announced that the FDA had accepted the NDA . In addition, Genta announced on February 6, 200 4 that the FDA granted Priority Review status to the application. Defendant Itri stated: "This New
Drug Application represents the first clinical indication for a drug that promotes chemotherapy- induced apoptosis, the first systemic use of an antisense thereapy, and potentially the first new dru g for patients with advanced melanoma in almost 30 years ."
22. During a February 11, 2004 conference call with analysts , defendant Warrel l stated:
We believe the application as submitted in December is approvable as is . Other than the routine safety update in April, we have no plans to reanalyze the efficacy [in the submission] during the review period unless specifically requested by the agency . .. . Safety data show a modest increase in neutiopenia and fever [which] appears quite acceptable from an oncology point of view.
23. Genta's Form i 0-K for the year ending December 31, 2003, which was filed wit h the SEC on March 12, 2004, stated with respect to the Phase 3 trial results :
The addition of Genasense TM to dacarbazine did not appear to be associated with serious, previously unreported adverse reactions compared with the use of dacarbazine alone .
24. Defendants' statements in paragraphs 19-23 falsely represented to the investing public that Genasense did not appear to be associated with serious adverse reactions in the Phase 3 clinical trial . In fact, defendants knew that the use of Genasense was associated with increased toxicity and discontinuations due to adverse events, and that FDA approval of the Genasense NDA was unlikely because the increased toxicity and adverse events associated with the use of Genasens e outweighed its marginal benefits. Specifically, defendants knew that (a) 69 (18.6%) patients discontinued therapy for adverse events on the G3139 arm versus 39 (10 .8%) on the DTIC arm
7 alone; (b) the rate of serious adverse events was 40% on the G3139 arm versus 27% on DTIC alone;
(c) all toxicities were more frequent on the Genasense arm ; (d) the frequency of grade 3-4 advers e events, serious adverse events and treatment emergent adverse events leading to discontinuation were all higher on the Genasense arm; (e) the incidence of thrombocytopenia, a serious bleeding disorder characterized by a marked decrease in the number of blood platelets, was 28 .8% in the
Genasense arm, compared with 11 .1 % in the DTIC arm ; (f) pyrexia (fever) was three times as frequent on the Genasense arm with 53 .1 % in the Genasense arm, compared to 17.5% on the DTIC arm ; (g) neutropenia (significantly reduced white blood cells) and anorexia were twice as frequen t with Genasense; (h) upper extremity thrombosis (blood clots) occurred in 5% of the patient s
receiving Genasense, compared with .8% of the patients receiving DTIC alone ; (i) in the Genasense
arm, 18 .6% of patients discontinued treatment permanently, compared with 10 .8% on the DTIC arm;
and (j) since the dosing of DTIC was identical on the two arms, toxicity increases were due to the
addition of G3139.
SCIENTER ALLEGATION S
25 . As alleged herein, defendants acted with scienter in that they knew that the publi c
documents and statements issued or disseminated in the name of the Company were materially fals e
and misleading; knew that such statements or documents would be issued or disseminated to th e
investing public ; and knowingly and substantially participated or acquiesced in the issuance o r
dissemination of such statements or documents as primary violations of the federal securities laws .
As set forth elsewhere herein in detail, defendants, by virtue of their receipt of information reflecting
the true facts regarding Genta, their control over, and/or receipt and/or modification of Genta' s
allegedly materially misleading misstatements and/or their associations with the Company whic h
8 made them privy to confidential proprietary information concerning Genta, participated in th e fraudulent scheme alleged herein . COUNT I
PURSUANT TO SECTION 10(b) OF THE EXCHANGE ACT AN D RULE 10b-5 PROMULGATED THEREUNDER (Against All Defendants)
26. Plaintiff incorporates by reference the allegations of paragraphs 1 through 25 as if fully set forth herein .
27. The reported financial results of Genta were materially false and misleading, and defendants knew or were reckless in not knowing they were so, because defendants prepared an d participated in the issuance of the deceptive and materially false and misleading statements to the investing public, as set forth above .
28. Defendants employed devices, schemes, and artifices to defraud and engaged i n acts, practices, and a course of conduct in an effort to maintain artificially high market prices fo r
Genta securities in violation of section 10(b) of the Exchange Act and SEC Rule 1 Ob-5 .
29. As a result of the dissemination of the aforesaid false and misleading reports and releases, the market price of the securities of Genta throughout the Class Period was higher than i t would have been had the true facts concerning the Company's financial condition been known by the market.
30 . In ignorance of the artificially high market prices of Genta's publicly trade d securities, and relying upon the integrity of the market in which that stock was traded-the Nasdaq
National Market Plaintiff and the other members of the Class acquired Genta securities during the
Class Period at artificially inflated prices and were damaged thereby.
10 31 . Had the market known of the true financial condition of Genta, which was falsel y represented by defendants, plaintiff and the other members of the Class would not have purchase d or otherwise acquired their Genta securities during the Class Period at artificially inflated prices a t which they did . Hence, plaintiff and the other members of the Class were damaged by defendants ' violations of Section 10(b) and Rule I Ob-5.
COUNT II
PURSUANT TO SECTION 20(a) OF THE EXCHANGE ACT (Against the Individual Defendants)
32. Plaintiff incorporates by reference the allegations of paragraphs 1 through 31 as if fully set forth herein .
33 . This claim is asserted against the Individual Defendants and is based on section
20(a) of the Exchange Act. Individual Defendants acted as controlling persons of Genta within the meaning of section 20(a) of the Exchange Act. By reason of their positions as officers and directors of Genta and ownership of Genta stock, Individual Defendants had the power and authority to cause or to prevent the wrongful conduct of herein and did exercise such power and authority .
34. By reason of the foregoing, Individual Defendants are liable jointly and severall y with and to the same extent as Genta for Genta's violations of section 10(b) of the Exchange Act an d
Rule lOb-5 .
PRAYER FOR RELIE F
WHEREFORE, plaintiff, on behalf of herself and the Class, prays for judgment as follows : (i) Declaring this action to be a proper plaintiff class action maintainabl e
pursuant to rules 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure and declaring
plaintiff to be a proper representative of the Class .
(ii) Awarding plaintiff and all of the other members of the Class damages in
an amount to be proven at trial, together with prejudgment interest thereon ;
(iii) Awarding plaintiff the costs and expenses incurred in this action,
including reasonable attorneys', accountants', and experts' fees; and
(iv) Granting plaintiff and the other members of the Class such other an d
further relief as the Court deems just and proper .
DEMAND FOR A JURY TRIAL
Plaintiff hereby demands a trial by jury.
Dated : New York, New York May 12, 2004 LOV STONE Bo
B . Patrick L. Rocco(PR 8621) Jennifer A. Sullivan (JS 6957) 163 Madison Avenue, P.O. Box 1277 Morristown, New Jersey 07962-1277 Telephone : (973) 775-8997 Facsimile: (973) 775-8777
MURRAY, FRANK & SAILER LLP Eric J. Belfi 275 Madison Avenue, Suite 801 New York, NY 10016 Telephone: (212) 682-1818 Facsimile: (212) 682-189 2
Attorneysfor Plaintiff
12 I,. Bonnie Rnst, do herby eta that.
I have twed the co ainr and hwre :authou e. :its Ming.
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