After Monday's close, Cell Therapeutics ( CTIC) said itwas selling 2.59 million shares of common stock to several unnamedinstitutional investors in a registered direct offering at $7.10. Theoffering, raising about $18 million, is priced at a 19% discount toCell Therapeutics' Monday closing price of $8.46. Tuesday, the company also said it has inked a $30 millionfinancing agreement for its marketed drug Trisenox. The timing of this stock sale is very peculiar and worrisome ifyou're a Cell Therapeutics fan. For the past six months or so, CEO JimBianco has been telling anyone who will listen about how well thecompany'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 3study are still blinded to the company, Bianco has repeatedly pushedback timelines for the completion of the study because enrolledpatients are living longer than expected. Last week, Bianco said to expect results from Stellar 3 at the end of the first quarter2005, delayed from earlier in the quarter. Are these patients living longer because of Xyotax? Bianco claimsnot to know yet (the longer-than-expected survival represents ablended group of patients taking the drug or a placebo). But thenagain, Bianco loves to spout historical statistics about how similarlung cancer patients in other studies rarely live this long. Thesehistorical comparisons (with a nudge, nudge and a wink, wink) aresupposed to make you believe that Xyotax is working, that Stellar 3study will be a success, and that Xyotax is destined for regulatoryapproval. Such public posturing by a company conducting an ongoing pivotalstudy is promotional and highly unusual, even questionable. You don'tsee executives from Genentech ( DNA) or Biogen Idec ( BIIB) providing running commentary on how many patients have died in their ongoing clinical studies. I'm halfexpecting Cell Therapeutics to stick a patient death "counter" on itsWeb site!
But if Bianco is so confident about Stellar3, then why is he directing the company to raise cash three months orso before Xyotax's moment of glory? And, presumably, before CellTherapeutics' stock price moves significantly higher? And why is CellTherapeutics raising money at such a steep discount to the marketprice? These are questions I'd be asking if I owned the stock. It mightbe that Cell Therapeutics is feeling the pressure of itsless-than-stellar financial position. The company's $103 million incash and marketable securities at the end of the third quarter is onlyexpected to last into the first half of 2005. The company is alsocarrying about $190 million in debt on its balance sheet. Tuesday, the company said it will receive another $25 million plus $5million in services by selling a royalty stream based on future salesof its drug Trisenox to Quintiles Transnational. This is the financingmove the company told shareholders to expect on its last quarterlyconference call, so why do this royalty deal and the stock sale? (Ona positive but unrelated note, CEO Bianco finally repaid a delinquent$3.5 million corporate loan plus accrued interest on Oct. 22.) Whatever the reason for Monday's quickie stock sale, it justdoesn't foster confidence coming so soon before the crucial Xyotaxdata event expected at the end of March. Cell Therapeutics'shareholders had better hope that the Xyotax Stellar 3 trial is asuccess, because if it fails, a stock sale at a 19% discount to themarket price will be the least of their worries.