It’s time to talk about survival strategy if you’re Seattle-based Cell Therapeutics. The company (NASDAQ: [[ticker:CTIC]]) suffered a humiliating public beatdown yesterday from an FDA advisory panel, which said unanimously that the company’s lymphoma drug, pixantrone, isn’t ready for the U.S. marketplace.
Even though the FDA doesn’t have to make a formal decision on this application until April 23, the agency didn’t hide its feelings about the application. FDA’s cancer drug boss, Richard Pazdur, issued a blistering critique, saying Cell Therapeutics was essentially asking for approval of pixantrone based on “a single incomplete trial.” He added that the PIX301 trial looked more like an exploratory mid-stage study than the kind of rigorous proof from a Phase III trial the FDA demands before it will approve a new cancer drug.
If the application is rejected, what’s next for Cell Therapeutics? The company, which has burned through more than $1.4 billion of investors’ money since 1991, has no marketed products and nothing else in the pipeline with a chance of generating sales anytime soon. Cell Therapeutics had a little more than $37 million in cash in the bank heading into this year, which isn’t quite enough to run the business through September, according to the company’s annual report.
“After spending $1.4 billion of shareholders’ money, maybe it’s best for Cell Therapeutics to return what’s left to shareholders and call it a day,” says David Miller, president of Seattle-based Biotech Stock Research, an independent firm that specializes in covering small public biotech companies.
There isn’t much room to maneuver. Cell Therapeutics lost about half of its stock market valuation yesterday after the FDA panel vote, so it will be much more difficult and expensive if it wants to raise new capital by selling new shares to investors. The company has a whopping 616 million shares outstanding already, valued at 47 cents apiece at yesterday’s close, giving it a market valuation of $290 million. That valuation probably isn’t sustainable for long, Miller says. He notes that the stock opened at 12 cents a share immediately after the FDA panel vote, and climbed after that, which was probably the result of derivatives traders exiting their positions in the company, rather than a valuation that’s based on the company’s cash in the bank plus its technology. When those forces return to the stock, the company’s market valuation will likely fall below $100 million, Miller says.
So, if you’re CEO James Bianco, how do you get your company out of this jam? He has shown the ability to pull an 11th hour escape once before, keeping the company alive last year when it was down to its last few weeks of cash by selling off a key asset, closing down a facility, resorting to layoffs, and raising more cash.
The company didn’t respond to an interview request yesterday, so I figured I’d try to assess Cell Therapeutics’ options by sorting through the company’s documents and previous public statements. Here’s what I gathered about its other drug candidates, largely from the company’s annual report:
—Pixantrone in Europe. The company hasn’t yet applied for approval of pixantrone in the European Union, although it has shown interest in doing so. The company plans to file the equivalent of a new drug application to market pixantrone in Europe for relapsed or aggressive forms of non-Hodgkin’s lymphoma in mid-2010, according to its annual report.
But this isn’t a quick fix. European regulators tend to take
