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The End Is Near for Cell Therapeutics

SEATTLE (TheStreet) -- How much trouble does Cell Therapeutics (CTIC) find itself in? Even Rodman & Renshaw downgraded the stock this week.

Rodman is the healthcare investment banker of last resort, the go-to financier for the bottom of biotech's barrel. And yes, Rodman has raised money for Cell Therapeutics in the past, most recently in January. So when Rodman's biotech analyst gives up on Cell Therapeutics, you can be darn sure the future of the company is in very dire straits.

Monday's decision by a U.S. Food and Drug Administration advisory panel to recommend unanimously against approval of Cell Therapeutics' lymphoma drug pixantrone has ignited a serious fiscal crisis at the company.

Cell Therapeutics' shares are hanging stubbornly around the 70 cents level, remarkable given the gravity of the company's situation. That's not likely to last long, however. At this point, Cell Therapeutics isn't worth any more than 10 cents a share, and that's being generous with valuation.

The FDA is expected to announce its approval decision for pixantrone on April 23. The drug has essentially zero chance of being approved at this time, given the FDA's vociferous criticism of the pixantrone clinical data in non-Hodgkin's lymphoma (NHL) coupled with the 9-0 negative vote by the advisory panel.

Cell Therapeutics needed to raise more money with or without pixantrone's approval. The latter scenario makes the job all that much tougher. Bankruptcy is a real possibility if Cell Therapeutics doesn't find a way to raise more cash and pay down its debt. Even if the company manages to complete a financing, pixantrone's commercial potential is forever stunted, if not altogether dead.

At the end of February, Cell Therapeutics reported a cash position of $51 million. The company is burning approximately $7-8 million per month, which means the current cash on hand runs out in August.

Cell Therapeutics' cash crunch is exacerbated by the $40 million in convertible debt that the company must figure out a way to repay before July 1.

All in, Cell Therapeutics needs to raise about $70 million just to remain in business through the end of the year. At the current stock price of around 70 cents, this would require Cell Therapeutics to sell 100 million shares of common stock, bringing the company's total share count to almost 720 million.

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