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Investors Twice Shy on Cell Therapeutics

Punk Ziegel biotech analyst Matt Kaplan believes that the Stellar 3 delay does suggest that positive data are coming. He combed medical journals and found 10 studies involving similar lung cancer patients with performance status 2 who were treated with various combinations of chemotherapy drugs. In these studies, median survival fell typically into the four-to-five month range.

The last patient enrolled in the Stellar 3 trial in November 2003, so given an anticipated early 2005 data release, Kaplan believes this suggests that Xyotax is having a positive impact on survival. Kaplan rates Cell Therapeutics a buy with an $18 price target. His firm has a banking relationship with the company.

But yet, investors haven't responded at all. The stock is actually down from when Cell Therapeutics first started dropping bullish hints about Stellar 3 in May.

"My guess from an investor standpoint is that in the absence of any near-term data, investors are not willing to give Cell Therapeutics the benefit of the doubt, especially when management has a history of disappointing," said Lehman Brothers analyst Jim Birchenough.

The biggest disappointment so far, he says, is the company's failure to follow through on a much-hyped promise to ink a Big Pharma marketing partnership for Xyotax. Birchenough downgraded Cell Therapeutics to equal weight from overweight in June 2003, when instead of announcing an expected Xyotax deal, the company ventured over to Europe to acquire Novuspharma, a rather obscure Italian biotech firm that had been on the sale block for months, with no takers. (Birchenough's firm doesn't do banking for Cell Therapeutics.)

Indeed, a look at Cell Therapeutics' chart shows that its stock hit the skids the day the Novuspharma acquisition was announced on June 17, 2003. The previous day, the stock hit an intraday high of $15.70 -- it hasn't been anywhere close to that since.

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