) --

Poniard Pharmaceuticals


finds itself in a worrisome financial hole following Monday's

failed phase III study of picoplatin

in small cell lung cancer.

The company reported cash and marketable securities totaling $40 million at the end of the September quarter. But Poniard is also burning about $10 million a quarter and carries an $18 million loan on its books that requires the company to maintain cash reserves at least equal to the outstanding balance on the loan.

At its current rate of spending, Poniard could be in violation of its loan agreement at the end of the year, which would make the loan callable and thereby force the company to restrict the use of its remaining cash.

Poniard does have a $60 million equity line of credit that it could tap, but only if the company's stock price is above $3 a share. Obviously, Monday's negative picoplatin results make that impossible, unless the company can re-negotiate the terms of the deal. The stock is down 76% to $1.77 in recent trading.

In many ways, the financial mess that Poniard finds itself is the biotech equivalent of the gamble taken Sunday night by New England Patriot's head coach Bill Belichick, when he decided to go for it on fourth down, late in the game with the ball still deep in his own end of the field.

Poniard could have partnered picoplatin earlier to bring in much-needed money, but CEO Jerry McMahon decided to hold off, betting that positive results from the picoplatin lung cancer study would boost the drug's value and bring with it much better partnering deal terms. McMahon rolled the dice, even with the knowledge that the company was getting uncomfortably close to a financial cliff.

Belichick was too smart for his own good Sunday night. On Monday, so was McMahon.

A Closer Look at Cardium's Wound-Healing Drug

(At 10:51 AM ET)

The publication of last Friday's

Biotech Stock Mailbag

was hampered by a technology glitch in our web-publishing software. To make up for the mistake, I'm going to re-post the reader email and my responses today:

Paul B. writes, "

Any chance of some coverage on Cardium Therapeutics (CXM) ? This was a very low-volume stock until quite recently, and had been trucking along nicely in the $2 range, then all of a sudden on October 14th, immediately following the announcement of GOOD results from a clinical trial, the stock tanked and kept going down. Even though a share offering was in the works, at $1.30, the price has now gone below 70 cents. What ... is going on? Why did the stock tank on good news?


Let me say right upfront that I didn't know anything about Cardium before reading Paul's email, and I've only now taken a cursory look.

The fall in Cardium shares might be related, at least partially, to what looks to me like so-so results from the phase IIb study announced on Oct. 14.

In its press release, Cardium said that 48% of diabetic foot ulcer patients treated once with Excellerate, its wound-healing drug, had complete wound closure after 12 weeks compared with 31% of patients treated with standard of care (the control arm of the study.)

That's a 55% relative improvement for Excellerate over control, but nowhere in the press release does Cardium say this benefit was statistically significant. That's a red flag I'd want explained if I were doing more research into Cardium and this study.

Excellerate is composed of an active drug suspended in what was supposed to be an inactive collagen matrix (think gel.) A potential problem and another red flag, however, is that Cardium says treatment with the collagen matrix alone "contributed substantially" to wound-healing responses in the study.

Cardium either doesn't know, or doesn't say, whether the active drug in Excellerate or the "inactive" gel was mostly responsible for the wound-healing benefit observed in the study i.e. what was the wound closure rate for Excellerate compared to the gel alone? You can take this question one step further by asking about the wound-closure rates for just the active drug component in Excellerate as well.

Cardium plans to move Excellerate into a phase III study following a meeting with the U.S. Food and Drug Administration. I wonder if regulators will ask Cardium to do more phase II work to better define the clinical benefit of Excellerate and its two individual components before proceeding into a pivotal phase III study.

That's just speculation on my part, but again, this is something I'd dig into if, like Paul, I were either invested in Cardium or interested in buying the stock.

It goes without saying that the stock sale with hefty warrant coverage initiated by Cardium the day after announcing the Excellerate data didn't help either.

Cell Therapeutics Lavishes Free Stock on Execs

(At 9:23 AM ET)

Christmas and Hanukah came early this year for executives and directors at

Cell Therapeutics

(CTIC) - Get Report


On Nov. 10, the company gave nearly 10 million shares in free stock grants to senior management and directors. The largest single award -- almost 3 million shares -- went to Chief Executive Officer Jim Bianco, according to filings made with the Securities and Exchange Commission.

The granting of free stock (the cost basis for the shares was zero) is part of the company's "long-term equity and retention" program, said Cell Therapeutics spokesman Dan Eramian, in an email statement.

With largesse like this, it's a wonder that any of Cell Therapeutics' executives would even think about leaving!

At Friday's close of 98 cents, Cell Therapeutics shares are up 600% this year, but the stock is down 50% from its June high due to a number of setbacks and disappointments related to the company's drug pipeline. In August, the FDA refused to grant priority, six-month review to its lymphoma drug pixantrone, while Cell Therapeutics, in September, withdrew its European approval application for the lung cancer drug Opaxio. The company is also still struggling with cash and debt issues.

Bianco benefited the most from the new stock grants. He was awarded 2.9 million free shares of Cell Therapeutics stock. After accounting for stock sold to cover taxes, Bianco's take amounted to more than $1.8 million, based on the stock's Nov. 10 closing price.

In addition to Bianco, four other top executives were awarded similar free stock grants, as were all six of the company's outside directors.

Poniard Cancer Drug Fails Pivotal Study

(At 8:01 AM ET)

Poniard Pharmaceuticals'


cancer drug picoplatin failed to significantly prolong survival in patients with advanced small cell lung cancer, according to results of a pivotal study disclosed Monday.

The negative results sent Poniard shares plunging 77% to $1.70 in Monday's pre-market trading session.

Small cell lung cancer patients treated with picoplatin had an 11% reduction in the risk of death compared to patients treated with best supportive care, but this survival benefit was not robust enough to be statistically significant.

"We are disappointed that the trial did not meet the primary endpoint. The data indicates that more patients on the best supportive care arm received chemotherapy following progression than those on the picoplatin arm, and we believe that this may have been a significant factor contributing to the trial outcome, as picoplatin appeared to demonstrate a trend toward a survival advantage," said Poniard CEO Jerry McMahon, in a statement.

The possibility that chemotherapy used as a third-line treatment after progression would hurt picoplatin's chances was one of the

major risks of the phase III study

identified by Poniard bears going into Monday's data release.

Picoplatin is a next-generation platinum chemotherapy drug designed to overcome resistance to prior platinum therapy. The drug may also cause less nerve-related toxicity.

The phase III study, dubbed "SPEAR," compared treatment with picoplatin against best supportive care in second-line small cell lung cancer patients. These were patients with advanced, progressive disease after treatment with a front-line platinum agent. The primary endpoint of the study was overall survival.

-- Reported by Adam Feuerstein in Boston.

Adam Feuerstein writes regularly for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;

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