Cell Therapeutics' Deal Begs $18 Million Questions

After Monday's close, Cell Therapeutics said it was selling 2.59 million shares of common stock to several unnamed institutional investors in a registered direct offering at $7.10. The offering, raising about $18 million, is priced at a 19% discount to Cell Therapeutics' Monday closing price of $8.46.

Tuesday, the company also said it has inked a $30 million financing agreement for its marketed drug Trisenox.

The timing of this stock sale is very peculiar and worrisome if you're a Cell Therapeutics fan. For the past six months or so, CEO Jim Bianco has been telling anyone who will listen about how well the company's lung cancer drug Xyotax seems to be performing in an ongoing phase III clinical trial. While always careful to say that data from the so-called Stellar 3 study are still blinded to the company, Bianco has repeatedly pushed back timelines for the completion of the study because enrolled patients are living longer than expected. Last week, Bianco said to expect results from Stellar 3 at the end of the first quarter 2005, delayed from earlier in the quarter.

Are these patients living longer because of Xyotax? Bianco claims not to know yet (the longer-than-expected survival represents a blended group of patients taking the drug or a placebo). But then again, Bianco loves to spout historical statistics about how similar lung cancer patients in other studies rarely live this long. These historical comparisons (with a nudge, nudge and a wink, wink) are supposed to make you believe that Xyotax is working, that Stellar 3 study will be a success, and that Xyotax is destined for regulatory approval.

Such public posturing by a company conducting an ongoing pivotal study is promotional and highly unusual, even questionable. You don't see executives from Genentech or Biogen Idec(BIIB) providing running commentary on how many patients have died in their ongoing clinical studies. I'm half expecting Cell Therapeutics to stick a patient death "counter" on its Web site!