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Biotech Stock Mailbag: Cell Therapeutics

Cell Therapeutics' (CTIC) latest fund-raising Wednesday night brought in a few emails, including Tanya D., who wrote to say, "I guess you were right about Cell Therapeutics needing to raise more money. But I don't understand why they would do it now with fast-track status for pixantrone coming so soon."

Cell Therapeutics sold 29.3 million shares in an overnight deal priced at $1.30, or a 20% discount to the Wednesday close. The deal included 25% warrant coverage, which means buyers got one warrant (priced at $1.70) for every four shares of stock they bought. The warrants are a common sweetener used by underwriters (in this case Rodman & Renshaw) to induce clients to participate in the deal.

Total gross proceeds from this follow-on offering: $38.1 million.

That's money badly needed by Cell Therapeutics, which is apparent to any investor who can even skim a balance sheet. I realize that most retail investors owning or interested in Cell Therapeutics focus on the cancer drug pixantrone, but you cannot ignore the perils of the company's balance sheet.

The recent debt tender offer improved Cell Therapeutics' financial health somewhat (and so does this latest financing) but the company is still burning cash, still has debt on the books, and will probably need to raise even more money in the future.

Tanya raises a good point about the timing of this recent fund-raising. The Food and Drug Administration will inform Cell Therapeutics next month whether the agency will grant pixantrone a six-month review. Pixantrone is a cancer drug. Almost all cancer drugs get a six-month review, so I'd only be surprised if the FDA decides to take more time.

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