Loss Widens at Cell Therapeutics

Cell Therapeutics (CTIC) suffered a net loss of $51.0 million (6 cents per share) in the first quarter of 2011, compared with a net loss of $44.2 million (7 cents per share) in the year-ago quarter. The lower loss per share in the reported quarter was due to a higher share count (878 million versus 598.9 million a year ago). The Zacks Consensus Estimate for the reported quarter was a loss of 2 cents per share. Cell Therapeutics did not generate any revenue during the reported quarter versus $0.020 million in the first quarter of 2010.

Research and development (R&D) expenses during the first quarter increased 55% to $11.5 million due to the $5 million upfront payment made to Chroma Therapeutics for the tosedostat (cancer candidate) deal in the quarter. Selling, general and administrative (SG&A) expenses decreased 53% to $8.6 million due to lower non-cash equity based compensation.

Product and Pipeline Update

Cell Therapeutics’ lead pipeline candidate, Pixuvri (pixantrone dimaleate), is being developed for the treatment of relapsed or refractory aggressive non-Hodgkin’s lymphoma (NHL) in patients who have not responded to other treatment options.

In April 2010, the US Food and Drug Administration (FDA) issued a complete response letter (CRL) for Pixuvri based on concerns that the clinical trials have not proved sufficiently the effectiveness of the drug. The FDA asked Cell Therapeutics to conduct an additional trial to determine the safety and efficacy of Pixuvri. In March 2011, the company started a new study, PIX-R, to compare the efficacy of Pixuvri in combination with rituximab against a combination of gemcitabine plus rituximab in relapsed or refractory diffuse large B-cell lymphoma (DLBCL). The primary endpoints of the trial are progression free survival and overall survival. The study would either serve as a post-approval confirmatory trial or a second registration trial for approval. The trial is expected to be completed in 2011.

Although the company is conducting an additional trial for Pixuvri, Cell Therapeutics appealed to the Office of New Drugs in December to reverse the FDA’s decision to deny approval of Pixuvri. Cell Therapeutics met with the FDA Office of New Drugs and presented documents supporting the efficacy of Pixuvri for the desired indication. A decision regarding the appeal is expected by the end of the second quarter of 2011. Pixuvri is also under review in the European Union.

In March this year, Cell Therapeutics entered into a co-development and license agreement with UK based Chroma Therapeutics Ltd. for Chroma’s anti-cancer pipeline candidate, tosedostat, for an upfront payment of $5 million. Tosedostat is initially targeted to be developed for indications like acute myeloid leukemia (AML), myelodysplastic syndrome (MDS) and multiple myeloma (MM). Cell Therapeutics will be responsible for the development and marketing of tosedostat in North, Central and South America while Chroma will take responsibilities for the rest of the world.

Our Recommendation

We currently have a Neutral recommendation on Cell Therapeutics, which is supported by a Zacks #3 Rank, tantamount to a short-term Hold rating. We believe the uncertainty surrounding the approval of Cell Therapeutics’ lead pipeline candidate Pixuvri for aggressive NHL in the US has slightly eased following the appeal against the FDA’s decision to deny approval of the drug. Moreover, the drug is also under review in Europe and is expected to be approved in 2011. We believe that most of the negative news surrounding Pixuvri is already factored into the stock price. The deal with Chroma is synergistic for Pixuvri as both are being developed for cancer indications. We prefer to remain on the sidelines until the FDA’s response to the company’s appeal becomes clear.

CELL THERAPEUT (CTIC): Free Stock Analysis Report

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