Cell Therapeutics targets stock market

Once again, Seattle-based biotech company Cell Therapeutics (CTIC) is approaching the stock market to raise funds. Yesterday, the company announced the commencement of an underwritten public offer of common shares (29.3 million) and warrants (another 7.3 million shares). CTIC is looking to raise about $35 million (net proceeds) through this offer. The company expects to use the proceeds towards working capital requirement, debt reduction and for funding its research and development activities. 

Although CTIC has an impressive product pipeline, the company’s liquidity position has been a matter of major concern. At the end of the last quarter, CTIC had only $0.7 million in cash, cash-equivalents, and securities available for sale and interest receivables. CTIC has taken several steps to raise funds including the sale of its only marketed product Zevalin, closure of an Italian research centre, and the issuance of equity shares. 

In April, the company received $6.5 million from Spectrum Pharmaceuticals (related to Zevalin stake sale) and $23.5 million from the issuance of preferred stock to a single institutional investor. But even after this, the company had resources sufficient to fund operations only till September. Moreover, CTIC is looking to bring down its debt levels further from the current level of $66 million. Hence, the need to tap the equity market once again.
 
The most important event to look forward for Cell Therapeutics is the FDA decision on pixantrone for the treatment of non-Hodgkin’s lymphoma (NHL). CTIC has already submitted the NDA for pixantrone in June 2009, but the company is yet to receive any communication from the FDA. Other pipeline candidates include Brostallicin (phase I/II clinical trial ongoing) and Xyotax for the treatment of women with lung cancer (NDA filing yet to occur). 

CTIC wants to make sure that it has enough resources till it gets FDA approval for pixantrone. In the best case scenario, pixantrone should be approved by the end of 2010 or early 2011. On approval, the company will have to invest significantly in the commercialization and marketing of the product. Even if the company is successful in raising funds from this equity offering, this will not be enough to fund operations for long without any proper revenue stream. CTIC has very little to fall back on should it fail to receive FDA approval. The tendency of the company to tap the stock market frequently erodes shareholder value.