Cell Therapeutics Finds Way to Survive, Persuading Investors to OK Sale of 400M Shares
[Updated: 6:20 pm Pacific] Cell Therapeutics isn’t ready to close its doors just yet, even after suffering what could have been a fatal setback this year. The Seattle-based biotech company (NASDAQ: CTIC), which had a new drug application soundly rejected by the FDA in April, said today that shareholders have given it the green light to sell up to another 400 million shares to raise more money to stay in business.
This was the fifth time Cell Therapeutics tried to rustle up enough shareholder votes in favor of issuing new shares after it tried, unsuccessfully, at previous shareholder meetings scheduled on April 9, May 14, June 4, and June 29. The company needed this vote badly, because it had already issued or reserved almost all of the 810 million shares that it had previously been allowed to offer. Since the company has no money-generating products on the market, it continues to burn cash. So Cell Therapeutics management told shareholders it was necessary to keep issuing more shares—something stockholders often detest because it dilutes the value of existing shares. But without selling more stock, the company said in its most recent quarterly report, it didn’t have enough cash to last beyond the end of this year.
“We are gratified by the support from our shareholders and of our mission to make cancer more treatable,” said Dan Eramian, a company spokesman, in an e-mailed statement.
Cell Therapeutics, in a recent letter to shareholders filed with the SEC, made clear that this was an urgent matter and that it needed help.
“We are committed to bringing our drugs to cancer patients, but CTI needs your support,” wrote Louis Bianco, the company’s chief financial officer, in a letter to shareholders dated Sept. 3.
“Your vote can help us make a difference in the potential success of these drugs and in the lives of the patients who could someday benefit from them,” Bianco added. “Without your voting support, CTI may not be able to continue this research.” [Editor's Note: Cell Therapeutics used the bolded text in its letter to shareholders.]
What the letter didn’t go into was the string of events that put Cell Therapeutics into such a predicament. The company, which has burned through about $1.5 billion of investors’ money since it was founded in 1991, has no marketed products and nothing else in the pipeline with a chance of generating sales anytime soon. Cell Therapeutics failed to win FDA approval of its latest lymphoma drug, pixantrone (Pixuvri), back in April. The drug was slammed by FDA cancer drug boss Richard Pazdur at an advisory panel meeting a few weeks earlier, in which he said the company’s application depends on a “single incomplete trial.” That’s because the Cell Therapeutics trial was supposed to enroll 320 patients over 36 months, but was halted after 45 months, when only 140 patients had enrolled.
Pazdur added that only eight of the 140 patients enrolled at sites in the U.S., even though the company had arranged for 28 U.S. sites to enroll patients. The enrollment was poor because many patients opted for other combination treatments, simple pain relief at the end of life, or a competing drug, rituximab (Rituxan), Pazdur said. The lack of U.S. patients means there’s a question of whether the results are generalizable to a patient population in the U.S., Pazdur said. After the presentation, the FDA’s expert panel of cancer drug advisors stated clearly, in a 9-0 vote, that the drug shouldn’t be cleared for sale in the U.S.
Discouraging as that might seem, the company has sought to give shareholders a reason to keep the company going. Cell Therapeutics, in the recent letter from its finance chief, said it is “moving toward” seeking approval of pixantrone in the European Union. And earlier this week, the company said it plans to appeal the FDA’s decision to reject the pixantrone application.
Cell Therapeutics has another drug in development, paclitaxel poliglumex (Opaxio, formerly known as Xyotax), which failed to show it could help lung cancer patients live longer in trials that enrolled 1,900 patients, according to a company fact sheet. The company is now hoping to revive the drug candidate based on an ovarian cancer study conducted by the Gynecologic Oncology Group, which has enrolled about 700 of the intended 1,100 patients, according to the most recent Cell Therapeutics quarterly report. The cooperative physician group may perform an interim analysis “as early as 2011,” according to the filing. “If successful, we could utilize those results to form the basis of a New Drug Application for Opaxio,” the company said in its quarterly filing.
[Updated with analyst comment] Today’s shareholder vote is a matter of “postponing the inevitable,” demise of the company, says analyst David Miller of Biotech Stock Research. Even with the new ability to sell 400 million shares, the company is unlikely to be able to raise enough cash to get data from a new pivotal trial of pixantrone, or to stick around long enough to get an answer from European regulators. Miller adds “pixantrone might actually work, but if you really believe in it, you should want it in the hands of a management team that can get a drug approved by the FDA.”
The company’s shares were worth 37.5 cents at the close of trading today.