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Cell Therapeutics: Addicted to Reverse Stock Splits

Pacritinib's provenance should give investors pause. The drug was invented by Singapore's SBio and licensed originally to Onyx Pharmaceuticals (ONXX). Despite being a good strategic fit, Onyx later decided not to move pacritinib into phase III studies, returning the drug's rights to SBio.  

Later, Cell Therapeutics snagged pacritinib from SBio but for financial terms which were rather paltry for a promising late-stage cancer drug. Cell Therapeutics paid $30 million upfront along with a low single-digit royalty on sales, if approved. By comparison, Gilead paid just over $500 million to acquire YM Biosciences.   

I can't write about Cell Therapeutics without talking more about Bianco and his outsized (and undeserved) executive compensation package. The company hasn't filed its 2012 proxy statement yet, but in 2011, Bianco's salary and bonus totaled $1.4 million. When you add in the value of stock options and other perks, Bianco was paid almost $4.6 million in 2011. In 2009, the total value of Bianco's executive compensation was $12.6 million.

Then, there's the Bianco's use of corporate jets, the ultimate executive travel perk. Longtime followers of Cell Therapeutics remember the company once leased its own private jet. When that proved too expensive and embarrassing, Cell Therapeutics switched to merely chartering a jet.

This perk does not apply just to management, as it also pays well to be a relative of Cell Therapeutics' executives. In 2006, the company disclosed that $220,000 in shareholder money was used to pay for family members' use of chartered planes. More recently, the company stopped disclosing the specific costs for family travel on private jets even while acknowledging it still takes place.

Cell Therapeutics shareholders also pay for tickets on commercial flights for executive family members. From 2008 through 2012, these costs totaled $260,000.

And there are even more corporate perks. Cell Therapeutics shareholders paid $20,000 last year for Bianco's private security; $25,000 for personal travel expenses and a $4,900 annual gym membership.  

All this self-enrichment for a CEO who has destroyed 99.99% of shareholder value, failed four times with reverse splits and has left every long-term Cell Therapeutics shareholder holding an empty bag.  

This is the very definition of chutzpah.

Silverman has no position in Cell Therapeutics.

Jim Silverman is the managing member of RRC Bio Fund LP, a Boston-based hedge fund focused on small-cap biotech. RRC Bio was launched in 2007. Silverman also founded Risk/Reward Capital Management in 1997, a registered investment advisory. He lives in Cambridge, Mass., and received a BBA in finance from The George Washington University.
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