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CTIC Loss Widens, Resubmits NDA

CTIC

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Cell Therapeutics (CTIC) suffered a net loss of 15 cents per share (excluding special items) in the third quarter of 2011, wider than the loss of 14 cents in the year-ago quarter as well as the Zacks Consensus loss of 11 cents per share. The wider loss per share in the reported quarter was due to an increase in research and development expenses. Cell Therapeutics did not generate any revenue during the reported quarter. Total operating expense in the quarter increased approximately 18% to $15.3 million due to higher spend on pixantrone PIX306 clinical study which resulted in increased R&D expenses.

Update on Pixantrone

In late October Cell Therapeutics resubmitted the new drug application (NDA) to the US Food & Drug Administration (FDA) for approval of its lead pipeline candidate pixantrone based on data from the PIX301 trial, which was the basis of the original NDA filing. Pixantrone is intended to be used for the treatment of relapsed or refractory aggressive non-Hodgkin's lymphoma (NHL) for patients who have failed two or more prior lines of therapy. Pixantrone was earlier rejected by the FDA in April 2010 based on concerns that PIX301 has not proved sufficiently the effectiveness of the drug. In December 2010, Cell Therapeutics filed an appeal against the decision of the FDA to deny approval to pixantrone. Cell Therapeutics met with the FDA’s Office of New Drugs (OND) in May 2011 which allowed it to re-submit the NDA for pixantrone without the need for an additional trial.

The OND recommended that Cell Therapeutics will have to conduct an additional independent radiologic review, utilizing a new independent panel of radiologists, of the PIX301 trial to determine the soundness of the primary endpoint. In late September 2011, the additional independent radiologic review of data from PIX301 by an independent panel of three radiologists confirmed the statistical significance of response and progression endpoints of the study.

The decision from OND removed a major overhang for the company and revived the prospects of pixantrone. The company has been saved 2-3 years time by getting the opportunity to file on the basis of the original completed pivotal trial, PIX301, instead of the new trial PIX306. With the second independent radiologic review of the original PIX301 trial confirming the statistical significance of response and progression endpoints of the study, the company has moved closer to getting pixantrone approved.

Management believes the resubmitted NDA addresses the recommendations of the OND and also includes data and information that was noted in the complete response letter issued by the FDA in April 2010. The FDA has informed that Cell Therapeutics would receive a six-month review for pixantrone with approval anticipated in April 2012.

Moreover, the drug is also under review in the European Union (EU). Management expects to receive positive recommendation from the Committee for Medicinal Products for Human Use (CHMP) in the EU in the first quarter of 2012.

Our Recommendation

We have an Outperform rating on Cell Therapeutics due to improved visibility on approval of pixantrone. We believe pixantrone is getting closer to approval. The stock carries a Zacks #1 Rank in the short term (‘Strong Buy’ rating).

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